Putting Stocks, Funds and Brokerage Accounts Into a Trust

A brokerage account is often a family’s second-largest asset. The good news: putting it into a trust is usually straightforward and does not trigger tax.

What Are the Two Ways to Put a Brokerage Account in a Trust?

Option 1: Retitle it as a trust account
Ask your broker (such as Fidelity, Schwab or Vanguard) to change the account to the trust’s name. Most brokers have a dedicated trust account form and will ask for the trust or a trust certification.

Option 2: Keep it in your name and add a transfer on death (TOD) beneficiary
New York has adopted the Uniform TOD Security Registration Act (EPTL §13-4.1 et seq.), which allows a securities account to pass to a named beneficiary at death. The beneficiary can be your trust.
- The limitation is the same as with bank accounts: it only works at death, not during incapacity.

Does Retitling Count as a “Sale” That Triggers Capital Gains Tax?

No. Retitling is not a sale. The stocks and funds move into the trust account unchanged. A revocable trust continues to use your Social Security number during your lifetime, and your tax filing does not change.

Will My Children Still Get a “Step-Up” in Basis?

Yes. Assets in a revocable trust are still part of your estate at death, so your heirs can usually receive a step-up in cost basis to the date-of-death value (Internal Revenue Code (“IRC”) §1014).

Example (hypothetical): Ms. Chen bought stock years ago for $50,000. At her death it is worth $300,000. Her children inherit it with a new basis of $300,000, so if they sell right away for $300,000, their capital gain is close to zero. If instead Ms. Chen had given the stock to her children during her life, they would keep her $50,000 basis and might owe tax on $250,000 of gain when they sell.

I Still Have Paper Stock Certificates. What Do I Do?

Contact the company’s transfer agent. You will usually need:
- A transfer form or stock power;
- A Medallion Signature Guarantee, usually available at a bank or brokerage.
It is often easier to deposit the certificates into a brokerage account first and then retitle the whole account.

What About U.S. Savings Bonds?

Through the U.S. Treasury’s TreasuryDirect system or the appropriate forms, savings bonds can be reissued in the trust’s name or given a death beneficiary.

What About Employer Stock Options, RSUs and Stock Purchase Plans?

Unvested awards are generally governed by the company plan and cannot be moved into a trust. You can only name a beneficiary as the plan allows;
Vested shares already in your brokerage account can be retitled like any other stock.
Check your company’s plan documents or ask human resources.

Should a 529 Education Account Go Into the Trust?

Generally, no. Rather than retitling it, name a successor owner, such as your spouse, a trusted relative or your trust.

I Hold a Lot of One Stock. Will the Trust Force Diversification?

New York trustees are generally bound by the Prudent Investor Act (EPTL §11-2.3), which ordinarily calls for diversification. If you want a successor trustee to keep a family business, a long-held stock or real estate, the trust should expressly authorize retaining it. Otherwise the trustee may feel forced to sell, or risk liability for not selling.

Can I Still Trade on Margin or Trade Options in a Trust Account?

Some brokers impose extra restrictions or paperwork for margin or options trading in trust accounts. Ask before retitling.

What About Brokerage Accounts Overseas?

Foreign accounts are usually governed by local law and carry U.S. foreign asset reporting requirements. (See Part 15.)

The Bottom Line

The key to funding a brokerage account: get your broker’s trust account form, or name the trust as TOD beneficiary. Retitling does not trigger tax, and a step-up in basis is usually still available at death.

Attorney’s perspective

Funding a brokerage account is usually easy. The real work is in the trust’s investment provisions, such as whether the trustee may keep a stock your family has held for decades. I tailor those authorizations to your holdings and your family.

For advice about your own family’s situation, call +1 718-218-5805 or schedule a consultation. We meet clients in Flushing and Manhattan, in English or Chinese.

Series overview

This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. For advice about your situation, please contact us.

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