Inheriting stock portfolio

[Anonymous]

I have always invested in mutual funds in the past because of the simplicity. I am inheriting a portfolio of stock, and need to get up to speed with this.
One option I have considered: selling some or all and putting the money in index funds. It would simplify things, but incur alot of taxes due to the capital gains.
Anyone have any advice?

[Anonymous]

Really depends how big we are talking. If it's more than $100k, get yourself to a tax planner and to a financial advisor.

[Anonymous]

You won't owe anything on the gains. The cost basis is reset when you inherit an asset.

[Anonymous]

Some times you can sell the losers and winners to balance the cap gains, but I am not sure how ownership date of the stocks will be determined for you. Sometime trusts are set up or you name was added to the stocks to avoid taxes and increase the time you owned the stock for tax purposes.
If you need the money, sell what you need now and pay the taxes(short term cap gain will be your tax rate). If not, hold for a year and sell(long term cap gain is 0, 15, or 20 based on income and must be held for a year).

[Anonymous]

I am not sure how ownership date of the stocks will be determined for you.

By the date of death of the person from whom OP is inheriting. BTDT.

OP, I inherited a portfolio from my grandfather when he died eight years ago. It was the portfolio of a 92-year-old man, so it wasn't exactly appropriate for me in my early 30s. I stuck with it for a while anyway, just moved it from my grandfather's broker to my broker, and then came a time when we really needed some of the money. We sold what was least appropriate first-namely bonds, then some of the equities.

[Anonymous]

Correct. The cost basis is the value on the date of death.

http://www.kiplinger.com/article/taxes/T055-C001-S002-cost-basis-for-inherited-stock.html

[Anonymous]

The cost basis for you becomes the date of death. You should be able to get the date of death valuation from the broker holding the stocks.

Assuming it is recent (and probably even if its not), it makes sense to sell and put the money into index funds that suit you.

I've been through this with my Dad's estate. I'm letting the stocks ride so far, just because I can't deal with it. So far, so good, but I'll probably make some changes after the estate is finalized in the next couple of months.

[Anonymous]

Anonymous wrote:You won't owe anything on the gains. The cost basis is reset when you inherit an asset.

Is the cost basis reset if the stocks were held within an irrevocable trust?

[Anonymous]

Anonymous wrote:

Anonymous wrote:You won't owe anything on the gains. The cost basis is reset when you inherit an asset.

Is the cost basis reset if the stocks were held within an irrevocable trust?

I don't think so. This happened to someone in our family, and selling the stocks was really difficult because of the huge capital gains issue.

[Anonymous]

Anonymous wrote:
Anonymous wrote:
You won't owe anything on the gains. The cost basis is reset when you inherit an asset.


Is the cost basis reset if the stocks were held within an irrevocable trust?


I don't think so. This happened to someone in our family, and selling the stocks was really difficult because of the huge capital gains issue.

Why would it be difficult to sell b/c of cap gains? At the most it's a 20% tax hit. If you earned that money it would be a lot higher. Sell it and be happy with the your gains.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
Anonymous wrote:
You won't owe anything on the gains. The cost basis is reset when you inherit an asset.


Is the cost basis reset if the stocks were held within an irrevocable trust?


I don't think so. This happened to someone in our family, and selling the stocks was really difficult because of the huge capital gains issue.

Why would it be difficult to sell b/c of cap gains? At the most it's a 20% tax hit. If you earned that money it would be a lot higher. Sell it and be happy with the your gains.

Also be aware that most states also charge a capital gains tax. For example, it's an additional 5.8% in Maryland, plus 3.2% local taxes on top of that.

[Anonymous]

Anonymous wrote:Really depends how big we are talking. If it's more than $100k, get yourself to a tax planner and to a financial advisor.

Thanks for the replies. What kind of tax planner do I need, an accountant or could a financial planner do it all?

[Anonymous]

Anonymous wrote:Is the cost basis reset if the stocks were held within an irrevocable trust?

This is why you need a professional. It would be unusual if your relative created an irrevocable trust. It is much more likely that they set up a grantor, living, revocable trust that became irrevocable upon death. In these more typical circumstances, your basis is the stepped-up value at the date of death. The stock in an irrevocable trust is usually a gift to the trust by the grantor and the basis of the stock is the grantors' basis, regardless of the date of the gift or grantor's death.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Is the cost basis reset if the stocks were held within an irrevocable trust?

This is why you need a professional. It would be unusual if your relative created an irrevocable trust. It is much more likely that they set up a grantor, living, revocable trust that became irrevocable upon death. In these more typical circumstances, your basis is the stepped-up value at the date of death. The stock in an irrevocable trust is usually a gift to the trust by the grantor and the basis of the stock is the grantors' basis, regardless of the date of the gift or grantor's death.

How realistic is it to dissolve an irrevocable trust that no longer seems worthwhile now that the estate tax exemption is higher? What sort of professionals should be sought out -- estate/trust lawyer? Elder care lawyer? Any recommendations in the DC area?