Value of Inherited Stocks
Some people keep their stock portfolios in accounts at their brokers, and valuing those portfolios after death is a relatively easy task. Other people have their stock investments put into certificate form and the certificates mailed out to them. If you have inherited a portfolio of stock from a relative who kept his or her own stock certificates, you have some work ahead of you. The first thing to do is to gather all the certificates together and make a spreadsheet list of what you have. Each certificate will have the issuing company name, the issue date and the number of shares. Put all that information in your spreadsheet and group by company, then by issue date and by number of shares. If you have shares from a company where your relative worked, they might be from a pension fund or a stock purchase plan, and may have different tax treatment from the rest of the portfolio.
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Research
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If your inherited stocks were domiciled at a brokerage firm, it would have updated the positions for name changes, mergers and stock splits and your job would be fairly easy. However, if you received certificates, instead of an account summary from a broker, your next job is to check to see if any of these things have happened to the companies and the shares you now own. Do not sell any stock until you know what you have. The Internet makes it relatively easy to research stock. Even if you don't recognize the names of some of the companies listed on your stock certificates, search the Securities and Exchange Commission's EDGAR database to determine the history of your shares. Call the companies and ask their investor relations administrator for lists of events that may have affected the number of shares in your position. You may find that some of the certificates represent companies that have gone out of business, but others may have become part of larger companies since they were originally purchased.
Market Value
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Once you know what your inherited portfolio actually contains, check the market value of the securities. You will need stock symbols, which are easily found via the search function of nearly every financial news website. Also check the values at the date of death of your relative, because that value is what will determine your cost basis for tax purposes when you eventually sell the stock. In the case of stock that was part of a pension fund, check the date your relative received the stock from that pension fund. You must pay capital gains tax on the value of the stock on that date. If you have pension fund stock in your portfolio, have your accountant figure your tax liability as it can be a complex matter.
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Step Up Value
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For most stocks inherited through an estate, the cost basis will be the price on the date of death. This is called the step up value because it doesn't matter what the decedent paid for the stock. Inheritance or estate taxes relate only to the fair value of the estate, itself. If settling the estate takes time, it is possible that your date for cost basis can be as much as six months after the date of death, but your attorney and accountant will be the best judge of whether this is appropriate in your case. Always take the lowest cost basis as this may save you estate tax.
Considerations
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Once you have researched your inherited stock certificates, open an account at a brokerage house and deposit them. The broker will also research your holdings, but it is important to check and double check inherited stock certificates because it is possible that some have gone through reverse splits or have been replaced by new certificates. If you sell 1,000 shares of stock, you must deliver that amount of stock even though you may find, to your dismay, that the stock went through a one-for-ten reverse split and you only own 100 actual shares. That means you must go into the market and purchase 900 more shares to make good on your sale. Always take advantage of the advice of your attorney, accountant and broker.
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- Photo Credit A businessman calculating expenses at tax time image by Christopher Meder from Fotolia.com
