Inherited Brokerage account

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Topic Author
dekecarver
Posts: 696
Joined: Mon Feb 22, 2010 9:24 am

Inherited Brokerage account

Post by dekecarver »

Hi all,
My sister and I are inheriting a Schwab brokerage account (100% stocks) 50/50 from our deceased father (VA resident) and have recently been contacted by the attorney who is assisting the executor. Our father died in 2019 and this is the first communication we have received regarding this account and are now being asked how we want to receive our individual share of the account, as stock/securities or cash. Of note, the only document we have received is a copy of the Aug 31, 2021 year to date (1/1/2021-8/31-2021) statement. We have never received a date of death balance statement on for this account.

My question is: What are the tax implications that have to be considered with having the shares sold and receiving a check vs receiving my share is stocks and selling off later? My initial thinking is have the stocks split and taking my share in cash but I am unclear of the tax implications for doing so at this point.

I will be talking with an attorney this week but wanted to throw my question out here just as a head start and possibly prompting other questions from the responses received.

Thanks in advance.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Inherited Brokerage account

Post by delamer »

If the stock is sold today and they send you a check, you will pay long-term capital gains on the difference between the cost basis and today’s sale price.

So you need to find out what the cost basis per share for each stock is to determine what you’d owe in taxes. The attorney should be able to provide you that information, or direct you to someone who can.

Only then can you determine the potential tax impact.

If they transfer the shares to you, then you can control when (or if) you sell shares and what the tax impact will be. That’s the option I’d choose, absent any further information,
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
rossington
Posts: 1806
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Inherited Brokerage account

Post by rossington »

delamer wrote: Tue Oct 26, 2021 8:52 pm If the stock is sold today and they send you a check, you will pay long-term capital gains on the difference between the cost basis and today’s sale price.

So you need to find out what the cost basis per share for each stock is to determine what you’d owe in taxes. The attorney should be able to provide you that information, or direct you to someone who can.

Only then can you determine the potential tax impact.

If they transfer the shares to you, then you can control when (or if) you sell shares and what the tax impact will be. That’s the option I’d choose, absent any further information,
I completely agree...take the stock transferred to you. You will have more control over all aspects of it moving forward.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Rudedog
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Joined: Wed Aug 01, 2018 3:15 pm

Re: Inherited Brokerage account

Post by Rudedog »

Take the stock, not cash. Ask the executor for a basis statement (market value per share on date of death) as of the date of death.
aristotelian
Posts: 12262
Joined: Wed Jan 11, 2017 7:05 pm

Re: Inherited Brokerage account

Post by aristotelian »

You'd be liable for gains since your father passed in 2019. S&P is up 40% since end of 2019, although the gains could be wildly different if invested in individual stocks. You might ask Schwab or the executor how much the investments have gone up. I don't see any downside to transferring stock for now and then taking some time to decide on your approach once you have more info.
MrJedi
Posts: 3538
Joined: Wed May 06, 2020 11:42 am

Re: Inherited Brokerage account

Post by MrJedi »

Agree with others. Take the shares and you can later decide the best strategy for liquidating them instead of just blindly doing it all at once.
Topic Author
dekecarver
Posts: 696
Joined: Mon Feb 22, 2010 9:24 am

Re: Inherited Brokerage account

Post by dekecarver »

Deleted.
Last edited by dekecarver on Wed Oct 27, 2021 9:09 am, edited 1 time in total.
Topic Author
dekecarver
Posts: 696
Joined: Mon Feb 22, 2010 9:24 am

Re: Inherited Brokerage account

Post by dekecarver »

Thank you for your response.
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CyclingDuo
Posts: 5988
Joined: Fri Jan 06, 2017 8:07 am

Re: Inherited Brokerage account

Post by CyclingDuo »

dekecarver wrote: Tue Oct 26, 2021 8:35 pm Hi all,
My sister and I are inheriting a Schwab brokerage account (100% stocks) 50/50 from our deceased father (VA resident) and have recently been contacted by the attorney who is assisting the executor. Our father died in 2019 and this is the first communication we have received regarding this account and are now being asked how we want to receive our individual share of the account, as stock/securities or cash. Of note, the only document we have received is a copy of the Aug 31, 2021 year to date (1/1/2021-8/31-2021) statement. We have never received a date of death balance statement on for this account.

My question is: What are the tax implications that have to be considered with having the shares sold and receiving a check vs receiving my share is stocks and selling off later? My initial thinking is have the stocks split and taking my share in cash but I am unclear of the tax implications for doing so at this point.

I will be talking with an attorney this week but wanted to throw my question out here just as a head start and possibly prompting other questions from the responses received.

Thanks in advance.
Take it as stock, not cash so you are not hit with a sudden bump in your LTCGs this year. Better to map out a strategy of how you can, in the most tax-efficient manner, make decisions to sell in the coming years. If you want to immediately know the cost basis, you can look up each ticker symbol to see what it closed at on the day of his death.

We highly suggest you read the Boglehead Wiki "Managing a windfall" and progress slowly. There is no rush to sell or make sweeping changes at the moment. You have time to plan and figure out what to do with the investments you are inheriting. See how they fit in with your current investment portfolio, how you could tax efficiently deploy them, etc... .

https://www.bogleheads.org/wiki/Managing_a_windfall

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Inherited Brokerage account

Post by delamer »

If the assets in the brokerage account were held in certain types of trusts (like a credit shelter trust), then there might not be a step-up in the cost basis at the time of death.

The attorney will be able to provide that information to the OP.

Determining the correct cost basis is critical. And doing so before any shares are actually transferred, especially if the assets are being moved to a different custodian.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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