Should Executor Sell Stock in Estate or Distribute Shares to Beneficiaries?
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Question:
My mother is 96 and has most of her assets in stocks. She has five children and wants to divide the assets in five equal parts. I am currently named as the executor of her estate. How does one decide how stocks are split? Is each stock holding divided in five?
Response:
This is a common situation in estates. Should stock be split among beneficiaries or sold and the proceeds split? 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.
Despite the fact that this is usually the easier way to go, there are instances where clients choose to hold on to the stock. Sometimes they have an emotional attachment because the stock represents a nest egg that a parent or grandparent created by saving and investing over many years. In other cases, the property may not receive a step-up in basis upon death because it’s in trust. For instance, if the property is passing to the next generation because a trust created by a grandparent or pre-deceased parent is now being terminated, it will not receive a step-up and its liquidation would cause an otherwise unnecessary capital gains tax. In such a case, it makes more sense to split the stock among the various beneficiaries.
Often, if that’s the course the family chooses to take, its most easily accomplished by each of the beneficiaries creating an account in the same investment house where the estate or trust already holds the stock. Then it’s relatively simple for the broker to split the stock among the various accounts.
Related Articles:
What’s a “Step-Up” in Basis and Why Would You Want It?
As Trustee Should I Distribute Investments or Liquidate them to Distribute Cash?
What’s the Best Method to Distribute Tangible Personal Property in an Estate?
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