How to redeem paper stock certificates

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It's the stuff of daydreams. You're rummaging through the dusty attic of a deceased relative when you find a collection of old stock and bond certificates. It could happen to you. But don't be too quick to start spending your new riches; the value could be a lot less than you think.

At the same time, don't be too quick to toss what seem like worthless certificates from a long-defunct company. Even if they turn out to be legally worthless, they can still have value—perhaps quite a bit. That's because there are collectors who seemingly throw good money after bad in their pursuit of a hobby known as scripophily, which loosely translates as love of paper.

How to Buy Stocks & Receive a Paper Certificate | Finance - Zacks

So back to the dusty attic. You've found some old certificates.

Old Stock Certificates: What Are They Worth? - WSJ

How do you determine if they still have value? The first step is to examine the certificates themselves. A few telltale signs will indicate right away if the paper has potential legal value.

An issued certificate—thus one with potential legal value—will have the name of the person to whom it was issued printed on it. The paper in your hands may instead be a "specimen," or a sample copy of a certificate—stamped with the word "specimen" and never issued to a holder. Specimens lack a signature, company seal or revenue stamp.

They are rare, however, and so are unlikely to be found. Next, check to see if the certificate has been canceled. A certificate is canceled when ownership has transferred from one securityholder to another. When this happens, the paper is stamped with the word "canceled" or punched with small perforations or holes, often punched through the signatures on the document.

The canceled security is proof of wealth transfer, and no longer represents an ownership stake. Think of it as a receipt. If your securities appear to be valid it still doesn't guarantee that the share or payment they represent is worth anything. Corporate history is peppered with bankruptcies, mergers and acquisitions, many of which result in defunct companies and claims not worth the paper they're printed on. Whether shares of an acquired company still have value, for example, partly depends on the terms of the deal, says Max Hensley, president of the International Bond and Share Society's U.

Chapter and editor of the society's journal, Scripophily. There is an online dealer in old stock certificates and bonds, Chantilly, Va. Or you can do the detective work yourself. Free resources and help include public libraries, which often have a well-regarded reference book: The book includes a directory of obsolete companies and names of transfer agents. You can also try the treasurer of the state in which the company was incorporated, and the office of investor assistance at the Securities and Exchange Commission.

Keep in mind, even if your musty paper has passed each test of value so far, a large caveat remains: Most stock and bond certificates aren't like cash. They are not always redeemable by whoever holds them. A registered security is issued to a specific owner, and will have that owner's name printed on it.

To collect on a registered security's value, according to the SEC, you must be able to prove that you were assigned rights to the security by a will or other trust instrument.

A bearer bond or stock, on the other hand, can be redeemed by whomever physically holds the paper. Bearer bonds actually have a sheet of coupons appended to them, hence the origin of the term "bond coupon. If you have papers proving you are legal heir to a registered security, and the issuer still exists, there are several ways to proceed.

If it's a bond, you can contact the trust company listed on it; if it's a stock, contact the transfer agent.

The transfer agent records the purchases and sales in the security as owners change and can have the securities transferred to your brokerage account. Or, finally, if all of this sounds like too much work, there is one more option: Hand over to your broker the securities and any paperwork proving your rights to them. The broker will consult the transfer agent, who then determines the value of the certificate according to current prices.

After all of that, the current value of the security should be reflected in your account. In years to come, there likely will be fewer paper securities with legal value and more with purely historic or collectible interest.

How to Cash in Stock Certificates - Budgeting Money

In , the New York Stock Exchange eliminated the requirement for physical certificates. As a result, few companies continue to issue physical securities, given the cost and extra paperwork involved.

Rosenthal is an editor for WSJ. Email her at rachel. A couple has given up a lot for a life of working and living on the road.

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Old Stock Certificates: What Are They Worth? - WSJ

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