What Constitutes a 'Security'?

The definition of what constitutes a “security” has broadened and changed dramatically over the years under both case and statutory law. Attorneys concentrating in securities law (whether by virtue of litigation or transactional work), as well as governmental and self-regulatory organizations, ranging from the Securities and Exchange Commission (SEC) to the National Association of Securities Dealers (NASD) to various exchanges, have been dealing with the increasingly complex question of what constitutes a “security.” This question is often posed to resolve particular claims in specialized venues, testing the acumen of even the most sophisticated securities practitioners and industry members. Securities can range from simple stock certificates, to grants, to options, to warrants, to stock indices, to certain partnership interests. The list of “securities” is extensive, growing, and in a state of perpetual flux and litigation. No wonder, then, that most matrimonial practitioners lacking expertise in this arcane field can run into significant difficulties and delays in arranging for the equitable distribution of assets that may well be considered “securities” by the relevant financial institutions, their counsel and/or their in-house compliance staff, even when the matrimonial practitioner is not at all certain that those assets are indeed “securities.” This two-part article describes the transfer process and offers sample forms as examples.

Introduction

Not surprisingly, financial institutions — just like nearly all other entities – seek to protect themselves as much as possible from potential liability, including regulatory and litigation hazards, by refusing to transfer what could be deemed to be “securities” without proper authorization, documentation, reporting and tax warnings. This is particularly true when an account has been “flagged” after notification by a party or an attorney that certain withdrawals have been suspicious. (“Flagging” an account may not happen automatically upon request; sometimes the entity will require a court order before doing so.) As a result, financial institutions may vary greatly in their requirements as to how the transfer of what they deem to be “securities” must be effectuated. At the same time, both the transferee and the transferor want to effectuate the distribution with as little paperwork and at the lowest cost possible to him or her. The expectant transferee almost invariably seeks to ensure the transfer of the securities to him or her as quickly as possible; usually the transferor could care less about the speed of the transfer unless financial or tax consequences provide motivation for a rapid distribution of the securities at issue.

When attempting to transfer securities between divorcing spouses, matrimonial practitioners must recognize the realities of the situation from the institution's perspective in order to accomplish the transfer effectively and efficiently. That perspective is, quite simply (and not necessarily in this order):

• to comply with the standards imposed upon them by the statutes and regulations governing their respective industries;
• to service their clients as satisfactorily as possible; and
• to generate profits for the institution itself and its employees.

If counsel for the divorcing parties understand and accept these basic facts, communicate the requisite transfer information as set forth in this article to the relevant institution as cogently and pleasantly as possible, and obtain the required authorizations and forms (assuming that the institution cooperates by promptly and fully responding to the inquiry), the transfer should occur with a minimum of aggravation, cost and delay.

Initial Steps

The most efficient ways to avoid problems during the negotiating and drafting stages of the agreement are: 1) contact the branch manager or compliance officer (or even the legal department) at the financial institution to determine what forms are required and what is the smoothest way to accomplish the conveyance without undue delay and expense to the parties; and 2) consult highly competent tax advisers/accountants to compute the tax consequences of the transfers to both sides, so that neither party can claim later on that he/she was not advised of the potential adverse consequences and then try to overturn the agreement.

Each financial institution may have its own peculiarities for effectuating the transfer. It is always safest to have the institution fax the practitioner its directives so there is no question later as to whether all requirements have been met. Whether the client is the transferor or the transferee spouse, the responsible attorney will do his or her utmost to protect the integrity of the deal by proper draftsmanship regarding the transfer. In doing so, the attorney can make every effort ensure that the securities are conveyed so as to avoid unanticipated tax issues for the parties, and compliance issues for the financial institution, both of which could have severe ramifications for either or both spouses as well as for the attorney. (See below regarding additional tips for contacting the institution directly.) Always remember the mantra of any separation agreement: Protect the integrity of the deal.

Appropriate Divorce-related Documents

The authorization to transfer securities from the firm's standpoint can range from simply completing one or many forms required by the particular institution; to having the transferee spouse execute all necessary forms in order to establish an account at the same institution for immediate in-house transfer of the securities (and then later establishing an account elsewhere in which to deposit the securities, if he or she so elects (see below); to providing redacted copies of the applicable separation agreement or court order (eg, the first page with the caption, the last page(s) with the notarized signatures, and the redacted page that indicates the required transfer involving that particular firm; to obtaining a court order directed specifically to that firm regarding the transfer.

The order should identify each source and recipient account by financial institution, account name and owner, account number, asset to be transferred, amount or fair market value of asset to be transferred and date by which the transfer is to occur. The order should also direct the titled spouse to execute all letters and forms required to effectuate the transfer(s). If possible, those letters and forms should be annexed to the order (see below), in order to avoid any misunderstanding as to the mechanics involved in the transfer. However, as a precaution, the order should also contain language that requires the transferor to execute any other required documents and forms that might not be annexed to the order.

Sample Court Order

Form I: COURT ORDER

[CAPTION]

[recite relevant procedural history, as necessary]

This Court having issued a Judgment on [date] in favor of [party] and against [party], in which [party] was awarded the following: (i) the sum of [amount]; and (ii) a direction that all financial institutions at which accounts or assets are maintained or held by or on behalf of [the party] shall distribute funds to [the party] in compliance with and pursuant to the Judgment, in such amounts and pursuant to such enforcement mechanisms as the [party] shall utilize to execute thereon, including but not limited to the following institutions: [name of institution and account number];

NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:

On or before [date], [party] shall execute (and notarize, where appropriate) all forms necessary to transfer from the [deferred compensation plan] maintained in [transferor party's] name or on his behalf at [name of institution and account number] the sum of [amount] payable to [name of party or law firm, "as attorneys"], which sum shall be sent via overnight mail to [addressee's

name and address]. This sum constitutes the [percentage of] the balance of the [deferred compensation plan] maintained in [transferor party's] name or on his behalf at [institution and account number], after mandatory Federal withholding taxes are deducted. Copies of the requisite forms are annexed hereto.

On or before [date], [transferor party] shall execute (and notarize, where appropriate) all forms necessary to transfer from the [deferred compensation plan] maintained in [transferor's party's] name or on his behalf at [name of institution and account number] the sum of [amount] payable to [name of party or law firm, "as attorneys"], which sum shall be sent via overnight mail to [addressee's name and address]. Copies of the requisite forms are annexed hereto.

On or before [date], [transferor party] shall execute (and notarize, where appropriate) all forms necessary to transfer [party's] [percentage] stock ownership [or number of shares of common/preferred/etc.] in [name of entities] held by or on behalf of [transferor party] at [name of institution and account number], copies of which forms are annexed hereto.

All taxes, commissions, sales charges and all other fees and penalties arising out of the transfer of assets pursuant to this Order shall be assessed against [party], who shall be solely and completely responsible and liable for all such taxes, sales charges and all other fees and penalties arising out of such transfer. [Add indemnify against other party, and make mutual where appropriate].

All assets directed to be transferred by [party] to [party] or to [party's] attorneys pursuant to this Order, and all taxes, sales charges, commissions, fees and penalties appurtenant thereto, are being used to satisfy a marital debt/the sole obligations of the [party]/the transfer of certain marital assets which are subject to equitable distribution.

What to Include

In addition, the order should specify how any and all commissions, fees and withholding taxes should be allocated between the parties, and whether and to what extent the distribution should be credited or debited against the remaining distributive award in the case. Failure to include or to consider this language in the order could have disastrous consequences for a party when the case is finally determined.

Forms That May Be Required By Securities Institutions

Assets may be held at securities firms in the form of cash, securities or assorted financial instruments. The party maintaining the account may have a long-standing relationship with the broker (sometimes called the account executive, account representative or “registered representative”). Counsel for the transferee spouse should obtain a notarized authorization from the transferor that permits such communication and allows direct access to information from the firm. Depending upon whether there is any agreement of the parties' respective counsel, as well as the level of acrimony in the case, counsel for the transferee must then determine the appropriate contact and requisite forms that particular securities firm will require before transferring assets from one party to another: most responsible securities firms will want to ensure that they are not liable for any improper or unauthorized transfers. This contact should be made prior to submitting the order to the court for signature.

Sample Authorization Form

Form II: AUTHORIZATIONS

A. Re: Annuity

To: [name and address of financial institution re: annuity]

Re: [name of account and account number]

Kindly respond to all inquiries made in connection with the above account by the following attorneys, including but not limited to any requests that they may make for complete copies of all documents including canceled checks, account statements, loan documentation, correspondence, memoranda, annual reporting statements, investment documents, deposit and withdrawal records, and all other documents referring or related to the above account:

[name and address of law firm]

[name and address of account owner]

[name and address of notary section]

B. Securities Firm

To: [name and address of securities firm]

Re: [name of account and account number]

Kindly respond to all inquiries made on my behalf by the following attorneys, including but not limited to any requests they may make for information, instructions, actions with respect to and complete copies of all documents related to the above account, including account application papers, account closing papers, canceled checks, account statements, correspondence, memoranda, annual interest reporting statements (Form 1099s), investment documents, trading orders and confirmation, deposit slips and withdrawal slips and all other documents referring or related to the above account:

[name and address of law firm]

[name and address of account owner]

[notary section]

What Securities Firms Require

Most securities firms will require, at a minimum, a letter from the account owner authorizing the transfer to the recipient spouse. It is always good practice to obtain a notarized signature from the account owner, on letterhead that bears his/her name, address and telephone number, and to provide the securities firm with the original letter by some traceable reliable carrier (such as personal delivery or a major overnight delivery service). The transfer letter should set forth the full name and account number of the source account, identify the assets to be transferred and their fair market value as of a particular date, and the name, account number and firm name of the recipient account.

The transfer letter should not make gratuitous references to the reason(s) for the transfer or the nature of the parties' dispute except to the extent absolutely and minimally necessary. The transfer letter should, however, make reference to any court order directing that particular transfer. In fact, the securities firm may and will likely require a certified copy of any such court order before the transfer is effectuated. (See above.) As noted above, a copy of the transfer letter may be annexed as a form to the order, prior to its issuance by the judge, to ensure that the account owner actually signs the required letter.

Sample Transfer Letter

Form III: TRANSFER LETTERS

A. Re: deferred compensation plan

[Letterhead of transferor spouse, including name, address and date]

Re:[full name and account number of deferred compensation plan maintained for the benefit of ...]

Dear Sir or Madam:

I understand that the entire balance of my interest in the above-referenced plan was [fair market value $...] as of [date], and that [percentage] of all distributions must be automatically withheld for Federal taxes. Please distribute the [percentage] balance of my interest in this plan, after deducting the mandatory [percentage] Federal withholding taxes from my account. Please make the distribution by issuing a check for the net balance from the above-referenced account, in the amount of [amount], payable to [name of payee]. This check should be sent via overnight mail to [name, address and telephone number].

This distribution is being made pursuant to a Judgment of the [court, name of judge and index number] (a copy of which is enclosed herewith) and an additional Order of [court, name of judge and index number] (a copy of which is also enclosed herewith).

All taxes, sales charges, commissions and all other fees and penalties arising out of this distribution will be assessed against me, the participant. I hereby assume sole and complete responsibility and liability for all such taxes, sales charges and all other fees and penalties arising out of this distribution. My social security number, which I am providing for that purpose, is [SS#]

Thank you for your immediate attention to this matter.

Very truly yours,

[name of participant]

[notary section]

B. Transfer of securities

[Letterhead of transferor spouse, including name, address and date]

Re: [full name and account number of account]

Dear Sir or Madam:

[Name of firm] is hereby authorized to immediately transfer [amount] of the current market value of the securities contained in the account

of [name and account number] to the securities account in the name of [recipient spouse name, address and Social Security number] which is being opened at your firm.

Thank you for your immediate attention to this matter.

Very truly yours,

[name of account owner]

[notary section]

Helpful Hints

It is generally quicker and requires less paperwork for the recipient spouse at the outset if the recipient spouse simply opens a new, separate account with the same securities firm for the initial transfer. In order to establish some semblance of autonomy, privacy and self-confidence, it is recommended that the recipient spouse retain a different broker at the firm to handle his/her account. After that new account is established, the recipient spouse can easily elect to establish another new account at a different securities firm if desired, and then subsequently transfer his/her assets to that new account without quite as much paperwork and without being under any immediate time constraints.

When the transferee spouse establishes a new account, whether it is at the same or another securities firm, the transferring and/or source firm(s) may also require the completion of certain other forms which are standard in the securities industry, before assets can be moved from one account to the other. The firm(s) may also require that certain forms particular to the firm(s) also be executed before completing the transfer. The best way to ensure the least hassle in these transfers is to obtain all required transfer forms from the relevant firm(s) before the transfer is to occur, and preferably, while preparing the court order so that they can also be annexed as schedules to the order.

There may be tax implications in the event that the securities to be transferred are then liquidated in order to provide the recipient with needed cash. In that event, the recipient should be provided with cost basis information, and should be aware that he/she may be required to pay taxes on the sale of those securities.

The conclusion of this article in next month's newsletter will address deferred compensation plans and provide forms for the completion of the transfer.

The definition of what constitutes a “security” has broadened and changed dramatically over the years under both case and statutory law. Attorneys concentrating in securities law (whether by virtue of litigation or transactional work), as well as governmental and self-regulatory organizations, ranging from the Securities and Exchange Commission (SEC) to the National Association of Securities Dealers (NASD) to various exchanges, have been dealing with the increasingly complex question of what constitutes a “security.” This question is often posed to resolve particular claims in specialized venues, testing the acumen of even the most sophisticated securities practitioners and industry members. Securities can range from simple stock certificates, to grants, to options, to warrants, to stock indices, to certain partnership interests. The list of “securities” is extensive, growing, and in a state of perpetual flux and litigation. No wonder, then, that most matrimonial practitioners lacking expertise in this arcane field can run into significant difficulties and delays in arranging for the equitable distribution of assets that may well be considered “securities” by the relevant financial institutions, their counsel and/or their in-house compliance staff, even when the matrimonial practitioner is not at all certain that those assets are indeed “securities.” This two-part article describes the transfer process and offers sample forms as examples.

Introduction

Not surprisingly, financial institutions — just like nearly all other entities – seek to protect themselves as much as possible from potential liability, including regulatory and litigation hazards, by refusing to transfer what could be deemed to be “securities” without proper authorization, documentation, reporting and tax warnings. This is particularly true when an account has been “flagged” after notification by a party or an attorney that certain withdrawals have been suspicious. (“Flagging” an account may not happen automatically upon request; sometimes the entity will require a court order before doing so.) As a result, financial institutions may vary greatly in their requirements as to how the transfer of what they deem to be “securities” must be effectuated. At the same time, both the transferee and the transferor want to effectuate the distribution with as little paperwork and at the lowest cost possible to him or her. The expectant transferee almost invariably seeks to ensure the transfer of the securities to him or her as quickly as possible; usually the transferor could care less about the speed of the transfer unless financial or tax consequences provide motivation for a rapid distribution of the securities at issue.

When attempting to transfer securities between divorcing spouses, matrimonial practitioners must recognize the realities of the situation from the institution's perspective in order to accomplish the transfer effectively and efficiently. That perspective is, quite simply (and not necessarily in this order):

• to comply with the standards imposed upon them by the statutes and regulations governing their respective industries;
• to service their clients as satisfactorily as possible; and
• to generate profits for the institution itself and its employees.

If counsel for the divorcing parties understand and accept these basic facts, communicate the requisite transfer information as set forth in this article to the relevant institution as cogently and pleasantly as possible, and obtain the required authorizations and forms (assuming that the institution cooperates by promptly and fully responding to the inquiry), the transfer should occur with a minimum of aggravation, cost and delay.

Initial Steps

The most efficient ways to avoid problems during the negotiating and drafting stages of the agreement are: 1) contact the branch manager or compliance officer (or even the legal department) at the financial institution to determine what forms are required and what is the smoothest way to accomplish the conveyance without undue delay and expense to the parties; and 2) consult highly competent tax advisers/accountants to compute the tax consequences of the transfers to both sides, so that neither party can claim later on that he/she was not advised of the potential adverse consequences and then try to overturn the agreement.

Each financial institution may have its own peculiarities for effectuating the transfer. It is always safest to have the institution fax the practitioner its directives so there is no question later as to whether all requirements have been met. Whether the client is the transferor or the transferee spouse, the responsible attorney will do his or her utmost to protect the integrity of the deal by proper draftsmanship regarding the transfer. In doing so, the attorney can make every effort ensure that the securities are conveyed so as to avoid unanticipated tax issues for the parties, and compliance issues for the financial institution, both of which could have severe ramifications for either or both spouses as well as for the attorney. (See below regarding additional tips for contacting the institution directly.) Always remember the mantra of any separation agreement: Protect the integrity of the deal.

Appropriate Divorce-related Documents

The authorization to transfer securities from the firm's standpoint can range from simply completing one or many forms required by the particular institution; to having the transferee spouse execute all necessary forms in order to establish an account at the same institution for immediate in-house transfer of the securities (and then later establishing an account elsewhere in which to deposit the securities, if he or she so elects (see below); to providing redacted copies of the applicable separation agreement or court order (eg, the first page with the caption, the last page(s) with the notarized signatures, and the redacted page that indicates the required transfer involving that particular firm; to obtaining a court order directed specifically to that firm regarding the transfer.

The order should identify each source and recipient account by financial institution, account name and owner, account number, asset to be transferred, amount or fair market value of asset to be transferred and date by which the transfer is to occur. The order should also direct the titled spouse to execute all letters and forms required to effectuate the transfer(s). If possible, those letters and forms should be annexed to the order (see below), in order to avoid any misunderstanding as to the mechanics involved in the transfer. However, as a precaution, the order should also contain language that requires the transferor to execute any other required documents and forms that might not be annexed to the order.

Sample Court Order

Form I: COURT ORDER

[CAPTION]

[recite relevant procedural history, as necessary]

This Court having issued a Judgment on [date] in favor of [party] and against [party], in which [party] was awarded the following: (i) the sum of [amount]; and (ii) a direction that all financial institutions at which accounts or assets are maintained or held by or on behalf of [the party] shall distribute funds to [the party] in compliance with and pursuant to the Judgment, in such amounts and pursuant to such enforcement mechanisms as the [party] shall utilize to execute thereon, including but not limited to the following institutions: [name of institution and account number];

NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:

On or before [date], [party] shall execute (and notarize, where appropriate) all forms necessary to transfer from the [deferred compensation plan] maintained in [transferor party's] name or on his behalf at [name of institution and account number] the sum of [amount] payable to [name of party or law firm, "as attorneys"], which sum shall be sent via overnight mail to [addressee's

name and address]. This sum constitutes the [percentage of] the balance of the [deferred compensation plan] maintained in [transferor party's] name or on his behalf at [institution and account number], after mandatory Federal withholding taxes are deducted. Copies of the requisite forms are annexed hereto.

On or before [date], [transferor party] shall execute (and notarize, where appropriate) all forms necessary to transfer from the [deferred compensation plan] maintained in [transferor's party's] name or on his behalf at [name of institution and account number] the sum of [amount] payable to [name of party or law firm, "as attorneys"], which sum shall be sent via overnight mail to [addressee's name and address]. Copies of the requisite forms are annexed hereto.

On or before [date], [transferor party] shall execute (and notarize, where appropriate) all forms necessary to transfer [party's] [percentage] stock ownership [or number of shares of common/preferred/etc.] in [name of entities] held by or on behalf of [transferor party] at [name of institution and account number], copies of which forms are annexed hereto.

All taxes, commissions, sales charges and all other fees and penalties arising out of the transfer of assets pursuant to this Order shall be assessed against [party], who shall be solely and completely responsible and liable for all such taxes, sales charges and all other fees and penalties arising out of such transfer. [Add indemnify against other party, and make mutual where appropriate].

All assets directed to be transferred by [party] to [party] or to [party's] attorneys pursuant to this Order, and all taxes, sales charges, commissions, fees and penalties appurtenant thereto, are being used to satisfy a marital debt/the sole obligations of the [party]/the transfer of certain marital assets which are subject to equitable distribution.

What to Include

In addition, the order should specify how any and all commissions, fees and withholding taxes should be allocated between the parties, and whether and to what extent the distribution should be credited or debited against the remaining distributive award in the case. Failure to include or to consider this language in the order could have disastrous consequences for a party when the case is finally determined.

Forms That May Be Required By Securities Institutions

Assets may be held at securities firms in the form of cash, securities or assorted financial instruments. The party maintaining the account may have a long-standing relationship with the broker (sometimes called the account executive, account representative or “registered representative”). Counsel for the transferee spouse should obtain a notarized authorization from the transferor that permits such communication and allows direct access to information from the firm. Depending upon whether there is any agreement of the parties' respective counsel, as well as the level of acrimony in the case, counsel for the transferee must then determine the appropriate contact and requisite forms that particular securities firm will require before transferring assets from one party to another: most responsible securities firms will want to ensure that they are not liable for any improper or unauthorized transfers. This contact should be made prior to submitting the order to the court for signature.

Sample Authorization Form

Form II: AUTHORIZATIONS

A. Re: Annuity

To: [name and address of financial institution re: annuity]

Re: [name of account and account number]

Kindly respond to all inquiries made in connection with the above account by the following attorneys, including but not limited to any requests that they may make for complete copies of all documents including canceled checks, account statements, loan documentation, correspondence, memoranda, annual reporting statements, investment documents, deposit and withdrawal records, and all other documents referring or related to the above account:

[name and address of law firm]

[name and address of account owner]

[name and address of notary section]

B. Securities Firm

To: [name and address of securities firm]

Re: [name of account and account number]

Kindly respond to all inquiries made on my behalf by the following attorneys, including but not limited to any requests they may make for information, instructions, actions with respect to and complete copies of all documents related to the above account, including account application papers, account closing papers, canceled checks, account statements, correspondence, memoranda, annual interest reporting statements (Form 1099s), investment documents, trading orders and confirmation, deposit slips and withdrawal slips and all other documents referring or related to the above account:

[name and address of law firm]

[name and address of account owner]

[notary section]

What Securities Firms Require

Most securities firms will require, at a minimum, a letter from the account owner authorizing the transfer to the recipient spouse. It is always good practice to obtain a notarized signature from the account owner, on letterhead that bears his/her name, address and telephone number, and to provide the securities firm with the original letter by some traceable reliable carrier (such as personal delivery or a major overnight delivery service). The transfer letter should set forth the full name and account number of the source account, identify the assets to be transferred and their fair market value as of a particular date, and the name, account number and firm name of the recipient account.

The transfer letter should not make gratuitous references to the reason(s) for the transfer or the nature of the parties' dispute except to the extent absolutely and minimally necessary. The transfer letter should, however, make reference to any court order directing that particular transfer. In fact, the securities firm may and will likely require a certified copy of any such court order before the transfer is effectuated. (See above.) As noted above, a copy of the transfer letter may be annexed as a form to the order, prior to its issuance by the judge, to ensure that the account owner actually signs the required letter.

Sample Transfer Letter

Form III: TRANSFER LETTERS

A. Re: deferred compensation plan

[Letterhead of transferor spouse, including name, address and date]

Re:[full name and account number of deferred compensation plan maintained for the benefit of ...]

Dear Sir or Madam:

I understand that the entire balance of my interest in the above-referenced plan was [fair market value $...] as of [date], and that [percentage] of all distributions must be automatically withheld for Federal taxes. Please distribute the [percentage] balance of my interest in this plan, after deducting the mandatory [percentage] Federal withholding taxes from my account. Please make the distribution by issuing a check for the net balance from the above-referenced account, in the amount of [amount], payable to [name of payee]. This check should be sent via overnight mail to [name, address and telephone number].

This distribution is being made pursuant to a Judgment of the [court, name of judge and index number] (a copy of which is enclosed herewith) and an additional Order of [court, name of judge and index number] (a copy of which is also enclosed herewith).

All taxes, sales charges, commissions and all other fees and penalties arising out of this distribution will be assessed against me, the participant. I hereby assume sole and complete responsibility and liability for all such taxes, sales charges and all other fees and penalties arising out of this distribution. My social security number, which I am providing for that purpose, is [SS#]

Thank you for your immediate attention to this matter.

Very truly yours,

[name of participant]

[notary section]

B. Transfer of securities

[Letterhead of transferor spouse, including name, address and date]

Re: [full name and account number of account]

Dear Sir or Madam:

[Name of firm] is hereby authorized to immediately transfer [amount] of the current market value of the securities contained in the account

of [name and account number] to the securities account in the name of [recipient spouse name, address and Social Security number] which is being opened at your firm.

Thank you for your immediate attention to this matter.

Very truly yours,

[name of account owner]

[notary section]

Helpful Hints

It is generally quicker and requires less paperwork for the recipient spouse at the outset if the recipient spouse simply opens a new, separate account with the same securities firm for the initial transfer. In order to establish some semblance of autonomy, privacy and self-confidence, it is recommended that the recipient spouse retain a different broker at the firm to handle his/her account. After that new account is established, the recipient spouse can easily elect to establish another new account at a different securities firm if desired, and then subsequently transfer his/her assets to that new account without quite as much paperwork and without being under any immediate time constraints.

When the transferee spouse establishes a new account, whether it is at the same or another securities firm, the transferring and/or source firm(s) may also require the completion of certain other forms which are standard in the securities industry, before assets can be moved from one account to the other. The firm(s) may also require that certain forms particular to the firm(s) also be executed before completing the transfer. The best way to ensure the least hassle in these transfers is to obtain all required transfer forms from the relevant firm(s) before the transfer is to occur, and preferably, while preparing the court order so that they can also be annexed as schedules to the order.

There may be tax implications in the event that the securities to be transferred are then liquidated in order to provide the recipient with needed cash. In that event, the recipient should be provided with cost basis information, and should be aware that he/she may be required to pay taxes on the sale of those securities.

The conclusion of this article in next month's newsletter will address deferred compensation plans and provide forms for the completion of the transfer.