Liquidating investments?

[Shugardrawers]

Dh is due to inherit approx $45k from his grandmother's estate and we should see it around late Feb/early March. A meeting was held in Kansas City with all the beneficiaries in which they got to choose what % they wanted in cash and what % they wanted in stocks. We couldn't make that meeting due to finances. A packet came from the attorney's office and he filled out that he'd like 1/2 in cash and 1/2 in stocks. His cousins all chose to get it all in cash. That's lovely but it leaves Dh with just stocks because by the time he was mailed the letter everyone else had already given their intentions that day of the meeting. My question is, is the estate/attorney/executor responsible for liquidating or do we have to do it on our own? Do we see a CPA, lawyer, investment counselor or who about that? We are both clueless. MIL is the executor and she's going along with what the attorney says because she doesn't know either. He pretty much said we are SOL and on our own because we were the last to get the letter back to him (we were the only ones who couldn't be there!).

 

[chrissyk]

I think that you would WANT it in stocks! The basis is whatever the price was on the day that the grandmother died. You need to talk to your CPA, but if it were me, I'd take appreciated stock over cash any day. I think that you guys are going to be very happy with how this works out in your favor.

 

[Shugardrawers]

The 1/2 and 1/2 is so that we can pay off ALL debts we owe. We think that's our first priority. And that would be about 1/2 the 45k. Otherwise, we'd love it all in investments.

 

[chrissyk]

The 1/2 and 1/2 is so that we can pay off ALL debts we owe. We think that's our first priority. And that would be about 1/2 the 45k. Otherwise, we'd love it all in investments.

You can liquidate it 2 seconds after you inherit it. What I was trying to say is that you are better off inheriting the stepped-up basis on that stock and THEN selling it! Do you have a good CPA? If not, they're worth their weight in gold

 

[Shugardrawers]

See? This is why I posted! I didn't know that we could actually wind up with more by liquidating ourselves! Never had a CPA but we can go find one easily. Thanks!

 

[QT Pooh]

Hmmm...if you liquidated it yourself, would you then be liable for capital gains tax on top of any inheritance tax your state may have (some states don't have one)? I would definitely seek out a financial counselor.

 

[chrissyk]

Hmmm...if you liquidated it yourself, would you then be liable for capital gains tax on top of any inheritance tax your state may have (some states don't have one)? I would definitely seek out a financial counselor.

The capital gain (or loss) would be based upon the stepped-up basis on the day that the grandmother died. Either way it would likely be minimal. The inheritance taxes (if any) would be paid out by the estate before distribution I believe. If the estate is not in a trust and is subject to probate, those fees would also come out prior to distribution.

Here is an article on inheriting stock/stepped-up basis:

http://money.cnn.com/2000/11/29/pensions/q_retire_slott/

 

[Shugardrawers]

Wait, don't go over my head here! Neither Dh nor I knows squat about investing. Can you tell me in plain english what we'll need to do? Just call a CPA and tell him we need to liquidate enough to pay our debts? Is it that simple? And what is "stepped-up"?

ETA: I read the article, it's a tad clearer but not much! I also googled and learned that VA has no inheritance tax. I gather that means the money isn't taxable at the state level but for our federal taxes is it different?

 

[chrissyk]

Wait, don't go over my head here! Neither Dh nor I knows squat about investing. Can you tell me in plain english what we'll need to do? Just call a CPA and tell him we need to liquidate enough to pay our debts? Is it that simple? And what is "stepped-up"?

ETA: I read the article, it's a tad clearer but not much! I also googled and learned that VA has no inheritance tax. I gather that means the money isn't taxable at the state level but for our federal taxes is it different?

The stepped-up basis works like this - Grandma might have paid $1 a share for her stock, but it was worth $50/share on the day that she died. The new taxible basis for the heirs is that $50/share. When the stock is sold, the capital gain (or loss) would be the difference between the price of the shares on the day that it's sold and the $50 price on the day of grandma's death. You can see where that would really reduce the taxible burden over paying the difference on the original $1 basis!

Yes, you do need a CPA for sure. Ask your friends who they would recommend and go from there. We love our CPA. We pay $300/year for him to do our taxes, but he's available year-round to answer all of our tax planning questions. He has saved us soooo much money in the past by keeping us informed. I stay on top of these things and I couldn't do it w/o him. I'm of the mind that everyone needs a good CPA.

I would find a CPA by word-of-mouth and tell him/her about the upcoming inheritance situation. Let them know that you are inheriting appreciated stock, and that you would like to liquidate said stock. It is just a matter of doing the taxes correctly, and this will be a no-brainer for any good CPA.

In terms of inheritance taxes, I thought that the the estate paid out the inheritance taxes before the distributions were made You are mainly worried about capital gains and/or income taxes I would think.

 

[DVCLiz]

What you'll need to do is set up a brokerage account of some type in order to receive the non-cash assets. You can set one up yourself or have your financial person do it for you. I think in this case it would be wise to hire a financial person - CPA, financial planner, etc. to advise you. The stocks, etc. will just transfer into your new account, and then you can do with them as you please. If you choose to keep them, your financial person can guide you about each asset's potential. You might choose to keep some and sell some others, for example. But once they are retitled to you they are yours to do with as you please!!!

It's much smarter to receive the stocks as stocks, instead of having the estate cash everything in, for the reason the previous poster mentioned.