Inheritance: securities held by a deceased person cannot be transferred to their heir's PEA

Facts

Following the death of her husband, institution Y, at which the deceased held an equity savings plan (PEA), told Mrs X that she could transfer the securities held by her husband to her own PEA.

Three months after this exchange, the Inheritance Department at institution Y corrected its statement and informed Mrs X that this operation was not possible and apologised to her for the erroneous information she had initially been given.

Displeased with the situation, Mrs X asked me to intervene in order to obtain the transfer of the securities held in her late husband's PEA to the one opened in her name.

Investigation

I contacted institution Y, which started by telling me that Mrs X had initially wanted to keep the securities previously held by her husband, which she had inherited. However, because of the rules applicable to PEAs, they could only be transferred to an ordinary securities account opened in Mrs X's name.

Institution Y explained that the only solution that would allow Mrs X to hold these securities in her PEA would be to sell them, pay the proceeds of the sale into the cash account of her plan, within the limit of the authorised payments, and then subscribe the same securities again. In this scenario, as a commercial gesture, institution Y told me that it would reimburse Mrs X for any brokerage fees.

Institution Y further told me that, according to information subsequently provided by Mrs X during the investigation of her case, in the end she was planning to sell the securities in question in order to finance renovation work. Institution Y indicated that, given the value of the securities, their disposal would generate a slight loss compared with the cost price at which they entered Mrs X's estate for tax purposes, excluding any taxation, a point that seemed to be of concern to the client.

In these circumstances, institution Y considered that Mrs X could not claim financial prejudice as a result of the incorrect information she had been given.

Recommendation

First of all, I thought it would be useful to provide some clarification as regards the applicable regulations, so that Mrs X could better understand the constraints associated with her situation.

I reminded Mrs X that a PEA is a tax wrapper, which is specific to its holder and governed by strict rules. As a result, the death of the holder automatically closes the PEA and triggers the calculation of any social security deductions due and which are deducted directly by the account keeper. The securities are then held in an estate account pending instructions from the heirs.

To be operational, a PEA requires the opening of a securities account and an associated cash account, enabling all operations carried out to be tracked ^[1].

In accordance with Article R. 221-111 of the Monetary and Financial Code, the undertaking managing the plan, in this case institution Y, must debit the cash account with the amount of the subscriptions or acquisitions of securities registered in the associated securities account, as well as with any withdrawals made.

Consequently, while regretting that she had initially been given incorrect information, I confirmed to Mrs X that the regulations prohibit a PEA from receiving previously acquired securities, and that it is thus not possible to transfer securities previously held in her late husband's PEA to her own PEA.

Therefore, I told Mrs X that the solution proposed by institution Y was the only one possible if she wished to hold these securities in her PEA.

It also appeared to me that the offer made by institution Y to bear the cost of the fees was an appropriate commercial gesture, given the error initially made in the information provided to Mrs X.

Lesson to be learned

As already indicated in an earlier dossier (March 2020: A "PEA" (personal equity savings plan) must be closed on the holder's death, but its closing is not equivalent to a liquidation order), a PEA must be closed when its holder dies.

However, this does not imply that the securities held in the account are sold. These are held pending instructions from the beneficiaries.

In no instance is the transfer of securities to a PEA permitted. Under no circumstances can such an instruction be successfully executed.