How does securities inheritance work?

What are securities?

Before we get into the actual legacy of securities, let’s be clear about what the term securities actually means. Basically, they are documents that confirm that their owner has some sort of property interest. In other words, that they own shares, bonds, promissory notes or other financial instruments. If you have securities, it means that you either own a part of a company (for example, just in the form of shares) or you have a claim (for example, in the form of bonds). People use securities to store money and multiply it by sharing in the profits of the institution.

What is a central securities depository?

A central securities depository(CSD) is a large database of all securities. The way it used to work was that if you bought, for example, a stock, you got a security in physical form. Today, however, everything runs on an electronic basis. Thus, it is in this depository that one can find all the records of all the securities that one owns.

A central securities depository has several main functions: it registers securities, keeps accounting records, and makes sure that securities are properly transferred to new owners. For example, if someone inherits shares, the depositary is a key link to ensure that these shares reach the rightful heirs.

In addition, the depositary must ensure that the new owner receives all the rights attached to the securities, such as profit shares or voting rights in general meetings.

How securities inheritance works

At first glance, a securities inheritance may seem like a complex situation that requires a demanding process of all sorts of arrangements. Don’t forget that an attorney can always take care of everything. On the other hand, it should be noted that a securities estate is not that different from other inheritances.

It all starts when the notary opens the succession proceedings. Part of this process is to determine whether the deceased made a will and whether he or she owned any securities, among other assets.

If he finds that this is the case, the notary must turn to the securities depository. The latter will provide him with information on what specific securities the deceased had registered in his account. Once the entire succession procedure has been carried out and everything has been concluded, the transfer of securities to the heirs takes place. This is an automated process in which, again, the depositary plays a key role and is in charge of the securities before the notary’s decision.

Each type of security may have a slightly different transfer process. While shares registered in a depositary can be transferred quite easily, bonds or promissory notes sometimes have to go through a more complicated official process.

Is it possible to settle a securities inheritance online?

Almost anything can be conveniently arranged online nowadays. For securities inheritance, you still have to go to a notary in person. However, our law firm allows online communication, so we can advise you on the easiest and fastest way to complete applications, forms and various certificates.

In addition, even the central securities depository has its own online system where you can obtain information about the securities and carry out some of the tasks associated with their administration. This can save you a lot of time and nerves.

What do I need to do if I have inherited securities?

If you have inherited securities, you have certain rights but also certain responsibilities. One right is, of course, the right to a share of the profits – if you have inherited shares, you are entitled to dividends, that is, a share of the profits of the company whose shares you own as the new owner.

On the other hand, you also have an obligation to pay taxes. Inheritance is exempt from income tax in the Czech Republic, but you may be liable to pay taxes on securities. This situation arises, for example, when you sell the securities and make a profit. In such a case, income tax would already apply.

Tip: Do you own property and are worried about what will happen to it after your death? A will is the easiest way to handle the whole matter. Find out how to prevent heirs from fighting with a will in our article.

Can there be any problems in inheriting securities?

The transfer of securities is in most cases relatively smooth and trouble-free, but of course, as in any other inheritance procedure, there can be some complications with securities. For example, if the information on the securities is not up to date, the depositary may not have all the details recorded correctly. In such cases, the notary and the depositary need to work together to complete or correct the information.

Another problem may arise if the deceased has securities held abroad. This can complicate the whole process considerably as different countries have different procedures and rules for transferring assets after death. Likewise if the deceased has shares in different companies. In such a case, the succession process can be more complicated as there are multiple institutions to communicate with, not just the central depository. Thus, owning securities abroad will usually only prolong the process. But even in these situations, we can help you with your succession.

Inheritance of foreign securities may be governed by the rules of the country where the securities are held, which can make the whole inheritance process longer and more complicated.

Summary

Securities inheritance may not be as complicated as it first appears. A central securities depository plays an important role in it. The CSD holds all the information about the ownership of securities and arranges for their transfer to new owners. Thanks to online tools, you can monitor and simplify the whole process.

If you are faced with a securities succession, an important step is to work with a notary to help you manage the whole process. And if there are any problems, it’s a good idea to contact experts to help you with the transfer of securities.

So, whether you’re inheriting stocks, bonds or other securities, there’s no need to worry – with the help of a notary and a central depository, everything will go smoothly.