How to Sell Stocks of Deceased Relatives (2024)

FAQs

How do you sell stocks of a deceased person? ›

The process for liquidating inherited stock is fairly straightforward. Once the stock is in the beneficiary's brokerage account, they can sell the stock by placing a sell order through the brokerage. The beneficiary can choose to sell the stock all at once or to sell it in smaller portions over time.

After providing a death certificate, proof of identity, probate court order, and others, the heir can either transfer the shares into their account or sell the shares for the proceeds. Ultimately, this has the potential to save significant sums of money due to the tax loophole.

Most of the time, you calculate the cost basis for inherited stock by determining the fair market value of the stock on the date that the person in question died. Sometimes, however, the person's estate may choose what's known as the alternate valuation date, which is six months after the date of death.

But what happens to stocks when you die? Stocks and other investments become part of your estate when you pass away. Who is entitled to inherit your stocks can be determined by your beneficiary designations, your will if you've created one or inheritance laws in your state if you die without a will in place.

For tax purposes, the cost basis of inherited stock is typically the value at the time of the giver's death, not the original purchase value. Inherited stock is always taxed at long-term capital gains rates regardless of the length of ownership by the giver or recipient.

You can hold the stock (any value increases after you inherit it will result in capital gains) or sell it at the stepped-up value without owing capital gains taxes.

The Federal Deposit Insurance Corp. continues to insure accounts for six months after an account holder dies, allowing the surviving account holder to redistribute funds to other accounts to keep them insured. Once the period elapses, FDIC coverage stops.

The holding period for stock received from a decedent is automatically considered long-term. It doesn't matter how long the decedent held the stock, or how long the recipient held it. A sale of stock received from a decedent will always produce long-term capital gain or loss.

Regarding your question, “Is inheritance taxable income?” Generally, no, you usually don't include your inheritance in your taxable income. However, if the inheritance is considered income in respect of a decedent, you'll be subject to some taxes.

Whether the deceased invested in the stock market by purchasing shares or received a stock option from an employer, the beneficiary could receive a portion or all of it upon the equity holder's death. Beneficiaries can do what they want with the stock they inherit. The options are to keep or sell it.

Is it better to inherit stock or cash? ›

Cash is king of inheritance assets.

It's simplest to deal with and the value is crystal clear. If you have accounts in multiple financial institutions, consolidate cash into one account.

It's much easier to simply liquidate the stock holdings and distribute cash, and this is the advice I usually give clients. After your mother's death, the stock will receive a step-up in basis so there will be little or no capital gains subject to tax once the stock is sold.

Disinheriting: Regardless of the size of your estate, you might unintentionally disinherit a child or other intended beneficiary. Or the beneficiary might not share the funds with your other children as you had hoped. The account ownership automatically transfers to the only person(s) named on TOD or POD.

The rule of survivorship states if you open a joint bank account and one person dies, the surviving owner has the right to take over the account.

The basis adjustment at death is equal to the fair market value as of the person's death. If the value of the property owned by the person who died had decreased since that person acquired it, the basis will be decreased.

How Does the IRS Verify Cost Basis in Real Estate? In real estate transactions, the IRS can verify the cost basis by looking at the closing statement of when the property was purchased, or any other legal documents associated with the property, such as tax statements.

Generally, capital gains tax (CGT) does not apply when you inherit an asset. When you sell an asset you have inherited, and the asset is: not a property, the normal rules apply for calculating your CGT. a property, such as a house, it may qualify for the main residence exemption from CGT.

If the date of acquisition was before 20th September 1985, your cost base becomes the market value of the asset at the date of death. If the date of acquisition was after 20th September 1985, your cost base becomes the original cost of the asset plus or minus any applicable adjustments to the cost base.