A critical part of estate planning with a living trust is aligning your assets with the trust. When transferring stock and bonds to your trust, you may be required to provide a medallion signature guarantee (MSG) as part of the process. An MSG is a unique tool used to protect the transfer of certain accounts and property from fraudulent transfers.
What Is a Medallion Signature Guarantee?
An MSG is a select certification type that combines a bank officer’s signature with a unique stamp to guarantee the transfer of certain stocks, bonds, and other securities. Although financial institutions offer various certifications to their patrons seeking to transfer securities, the MSG is a premier signature. This special signage also includes a unique barcode and an invisible ink compound to further increase security. The MSG ensures that
- your signature is valid,
- your identity is confirmed,
- you are the legal owner of the accounts or property you are trying to transfer, and
- the institution will assume liability if forgery has occurred.
In some regards, an MSG may sound similar to a notary signature, but a notarization will not be sufficient where the MSG is required. The MSG differs from a notarization by its focus. An MSG focuses on the bank institution, whereas a notarization focuses on you and your identity. By providing an MSG, the issuing person or firm promises that if your signature is not genuine, you are not who you claim to be, or you lack the capacity to make the transfer, they, as the issuing party, will reimburse the victim.
When Might I Need to Obtain a Medallion Signature Guarantee?
Medallion signature guarantees usually deal with securities like stocks or bonds that have been held in paper form rather than digital form. Today, securities are mostly retained by a broker in digital format, and the use for MSGs has decreased. In addition to when transferring stocks and bonds to a trust, there are other times a transfer of securities can occur and trigger the need for a MSG. For example, if you are changing jobs and would like to transfer a 401(k), you may be required to obtain a medallion signature for that transfer. You may also find that you are required to obtain this type of guarantee if you are consolidating your retirement accounts in a new brokerage account or deciding to provide stocks or bonds as a gift to your children or a nonprofit corporation. Finally, if these accounts or types of property must be probated at the owner’s death, the paper certificates may require an MSG before the securities can be given to the intended recipient.
To avoid the additional steps involved with obtaining an MSG, some people have found that financial institutions may be willing to transfer the securities in the name of the institution rather than in the owners’ names.
How Do I Obtain a Medallion Signature Guarantee?
If you need an MSG, you can probably obtain one at your local financial institution. The financial institutions that usually provide this guarantee are members of one of three MSG programs:
- The Securities Transfer Agents Medallion Program
- The Stock Exchanges Medallion Program
- The New York Stock Exchange Medallion Signature Program
Most institutions provide this service for little or no fee for customers who have been with them for at least six months. Due to program enrollment costs, smaller banks and institutions may not be members and may be unable to provide this service. You may have to open an account with another institution or pay a larger fee to obtain the guarantee in such cases.
Another critical factor in obtaining this guarantee is the personnel within the institution. Due to the guarantee’s nature, only specific bank officers can issue MSGs. Moreover, amongst the officials with authority to issue MSGs, there are various limits imposed on the institution’s surety. To that effect, you should always call ahead to find out who can provide the guarantee. It is then crucial to inquire as to how much they can guarantee. The certification provides limitations that vary by official and bank. Finally, schedule an appointment. In some cases, the process can be as short as ten minutes, whereas it may take up to two business days in other instances. You should also expect to appear in person to confirm your identity with the bank official signing the guarantee.
We Can Help
If you are in the process of transferring securities, there are many important factors to keep in mind in addition to obtaining an MSG. Contact our office to discuss your options as you prepare for the transfer of these significant securities.