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Question:

I’m the executor for my father’s trust and he passed away July 3 of this year. One of the things he has in his portfolio is some Allspring Global stock, and I’m wondering if I should cash that out and then distribute the proceeds among the five siblings?

Response:

I’m assuming your father’s trust was revocable, in which case the answer is almost certainly, yes. I know nothing about the stock in particular and can’t provide investment advice, but it’s probably the easiest way to handle the estate with little or no tax consequences. The tax basis in the stock which is used to determine the capital gains on its sale was adjusted (often referred to as “stepped up”) to the value on July 3rd. So the capital gain or loss on the sale of the stock will be the difference in the value since then. It’s much easier to distribute cash than to distribute stock. To do the latter, usually each beneficiary must set up a separate account at the brokerage house where the stock is currently being held. To distribute the proceeds you can simply write each of them a check. So, given that there should be little or no tax consequences on the sale of the stock and that it’s much easier to distribute the proceeds, you’re probably much better off simply selling the stock and writing out five checks.

There may be some situations where this is not the case. One example might be if your father’s were irrevocable or had been created by someone else for his benefit. In such a case, the stock might not be part of his taxable estate and the sale of the stock could cause the realization of capital gains. If that were the case, you might want to divvy up the shares among the five siblings so each could decide when to sell and pay the resulting tax. But even in that case, you would want to evaluate the situation and determine whether the trouble of handling the stock in this fashion is worth the effort.

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