It is common to receive real estate, personal property, or net cash during inheritances. However, several inheritances are not so common; among them is the inheritance of shares.
What to do with the inherited shares, when is the ideal time to sell them, and even worse, how to do it? Fortunately, this is not difficult to do when you have the right advice and indications.
In general, whoever receives the inheritance should not worry about it. The deceased, in this case, the testator, normally, should have assigned an executor for this type of situation.
The executor should be responsible for everything related to the inheritance. They will be the ones who will present the will, insure and administer the real or personal property, make the distribution of assets, etc.
The same executor will be responsible for distributing the shares to the beneficiaries or a single beneficiary in case there is only one. He may request a series of documents or meetings to finalize the whole procedure.
When the deceased has not hired an executor, and the shares correspond to legal matters, the interested parties must hire the executor and agree with him/her on all the issues related to the distribution.
In these cases, the executor will also be responsible for transferring the deceased’s shares to him or the beneficiaries. The process may take some time due to all the other formalities to be carried out in these situations.
In any of the cases, the executor will ask for documents such as a death certificate, identification documents of the beneficiary or beneficiaries, court order, etc. It will depend on whether there are variations according to the estate.
Yes, inherited shares can be sold by a beneficiary as if they were any other share owned by him/her. Because when you inherit a share, it becomes your property.
Normally, those who receive shares in inheritance are not very involved in the subject and do not have enough guidance to be very sure about selling. In these cases, it is best to hire a broker to make good decisions.
Is there a lot of money to pay in taxes?
Many people fear inheriting inheritances because they have to pay capital gains taxes. For example, if the deceased bought the stock for $10 and it is now $100, they fear they will owe taxes on the $90 gain.
In inherited stocks, this premise does not apply. When a person inherits stock, the cost basis of the stock is set at a price at the time of the original owner’s death.
It does not consider the amount at which the owner purchased the shares but, rather, the cost at the date of the owner’s death, regardless of whether the current price is higher or lower than the price at the time originally purchased the shares.
Therefore, returning to the previous example, when the shares are inherited, the cost basis would be $100, the price of the shares at the time of death, and not $10.
If the beneficiary later wishes to sell his shares, he must pay capital gains tax only from the base price up to the price at which he sold the shares.
After selling the shares, there are several recommendations to avoid bitter situations or loss of money.
Before selling the shares, ask your broker how they feel about the company where the shares come from. If it is a booming company with an upward trend, it might be a good idea to leave a small portion of the stock.
Leaving some shares is risky, so you should make the decision cautiously and only go for that small portion of the shares when you don’t need them. When you need money, it is better not to take the risk and sell them all.
Surely if you receive an inheritance and people find out after you sell the shares, many will start to need to borrow money for some strange reason. They may pay you particularly high-interest rates.
The best thing to do in this type of situation is always to say no, especially when dealing with individuals and not with established companies with a great track record and recognition in the market.
Particularly among family members or very close friends, it can be a very common practice, and although many people are very responsible, others may not be.
Plan what you will do with your money
One of the most common mistakes when receiving an inheritance is not planning what to do with the money because it generates a progressive expense.
Those who receive shares instead of cash have an advantage. They can plan what they will do with the money from the sale of the shares before selling them. In this way, they avoid having the money in the account and spending it on the slightest trifle.
Before selling the shares, it can be an excellent idea to hire a highly regarded financial advisor, especially when the shares represent a large amount.
The advisor can give you ideas on where to invest your money to ensure medium and long-term results, as well as advise you on how to pay off your debts if you have any.
Of course, suppose you owe a certain amount of money, whether a lot or a little, and the sale of your shares can cover it.
In that case, the advisor will probably recommend that you sell them as soon as possible to pay them off and avoid accumulating more interest on the debt or credit.