Transferring inherited stock to your own portfolio, or brokerage account, generally isn't difficult. The biggest issue in determining how the inherited stocks are transferred depends on the way they are titled. Some titling situations are relatively simple, while stocks inherited from a retirement account can be fairly complex, depending on your relationship to the deceased. Your broker can guide you through most transfer issues.
Transfer on Death Accounts
If the deceased titled the stocks as transferable on death, the shares bypass the probate process and become the property of the named beneficiary fairly easily. If you inherit stocks this way, contact the transfer agent for the securities, usually a bank or trust firm. You must send a certified copy of the death certificate to the transfer agent, along with a form to re-register the inherited stock in your name. The agent has a copy of the TOD registration. If there is any difference in your name or other information and that appearing on the TOD form, you might need to supply additional documentation. For example, if your name is Jane E. Smith, but your late aunt wrote Jane F. Smith on the TOD form, you may need to send in a copy of your birth certificate or other proof of identity.
If the stocks weren't TOD and went through the probate process, the estate's executor will provide you with your share of the stocks when the estate closes. You can then transfer them to another account just as you would any other stocks. Usually, the entire transfer process takes only a few weeks. You must fill out all forms given to you by the transfer agent, attaching a copy of the latest account statement to the transfer form. If you want to transfer some securities, but not all of them, just list the applicable stocks on the form.
For tax purposes, the cost basis of your inherited stocks is the fair market value on the day of the decedent's death. It may take you a while to actually gain possession of the shares while the estate goes through probate. If you sell the stocks after receiving them, you pay any capital gains tax or take a loss based on the value of the sale date. If you transfer the shares to another portfolio and later sell them, the gains or loss is also based on that sale date.
Individual Retirement Accounts
If you inherit stocks held in the deceased's IRA, entirely different rules apply. If you inherited from a spouse, you can choose to designate yourself as the IRA account owner, roll it over into your own IRA or qualified employer retirement plan or designate yourself as the beneficiary rather than as your own IRA. If you inherited the IRA from a non-spouse, you can't designate it as your own. This means you can't make any further contributions to it or roll it over into another IRA. If you leave the IRA in the name of the deceased with you as beneficiary, you can make withdrawals based on the age of the deceased at the time of death and your own age.
- What Kind of Stock Portfolio Should You Open for Children?
- How to Calculate the Weighted Average Beta of the Stocks Within the Portfolio
- How Do I Build an Income-Based Stock Portfolio?
- How to Calculate the Average Return on a Portfolio of Stocks
- How to Divide a Portfolio Between Stocks & Bonds
- What Happens to Dividends in a Stock Portfolio?
- The Risk of a Single Stock Portfolio
- What Does a Negative Residual Income Mean?
- How to Measure Idiosyncratic Risk in a Stock Portfolio
- How to Hedge a Stock Portfolio Against a Crash