What to Do With Inherited Stocks: Sell, Hold, or Diversify?
Inheriting stocks can create important decisions about taxes, investment risk, and what to do with the assets going forward. Learn how inherited stock cost basis works, when selling may make sense, and how to manage an inherited portfolio as part of your broader financial plan.
Inclinevest Wealth Management | Greenwood Village, Colorado | Serving clients nationwide
If you have inherited stocks from a parent, spouse, or another family member, you may be wondering whether to sell the shares, keep them, or move the investments into a portfolio that better reflects your own financial goals.
The answer depends on several factors. Inherited investments may receive a new tax basis, but that does not automatically make them appropriate long-term holdings. A large position in one company can create substantial investment risk, while selling without understanding the tax implications can lead to unnecessary complications.
You may also need to coordinate with an executor, trustee, CPA, or estate planning attorney before making changes. The right approach considers the investments, the estate or trust arrangements, and your overall financial situation together.
Quick Answer: What Should You Do With Inherited Stocks?
Start by confirming the ownership, value, and cost basis of the shares. Then evaluate whether the investments still make sense for your financial goals and risk tolerance. You generally do not have to sell inherited stocks immediately, but you also do not need to keep them simply because they belonged to a family member.
A financial advisor can help review the inherited investments, evaluate concentration risk, coordinate a transfer to a brokerage account, and manage the portfolio going forward. Tax and legal questions should be addressed with your CPA and estate planning attorney.
1. What Should You Do First When You Inherit Stocks?
Before deciding what to sell or hold, establish exactly what you inherited and how the assets are currently owned. The process can be straightforward when shares pass directly to a beneficiary, but more involved when an estate or trust is responsible for distributing the investments.
Obtain a complete inventory of the investments
Request a current statement and a complete list of the securities being transferred. Identify each stock, mutual fund, ETF, bond, and cash position. Review the number of shares, market value, account registration, and any restrictions on the assets.
Confirm the cost basis
Ask the executor, trustee, or brokerage firm for documentation supporting the tax basis of each security. The value displayed on a brokerage statement is not necessarily sufficient documentation of the tax basis.
Understand who has authority over the account
Determine whether the investments are held in an individual brokerage account, an estate account, or a trust. If the shares remain in a trust, the trustee generally has authority over investment decisions, subject to the trust document and applicable law.
If you also inherited an IRA or other retirement account, treat that as a separate planning issue. Inherited retirement accounts generally follow different distribution and tax rules than inherited taxable brokerage investments. See our guide to inherited IRA financial planning.
2. Do Inherited Stocks Get a Step-Up in Cost Basis?
Generally, inherited stocks receive a basis adjustment to their fair market value on the date the original owner died. This is commonly called a step-up in cost basis, although the adjustment can also be downward if the investment declined in value before death.
This can significantly reduce the capital gains tax a beneficiary might otherwise owe when selling appreciated investments.
Example of a step-up in basis
Suppose a parent purchased shares for $25,000 many years ago. At the time of death, those shares are worth $225,000. If the shares qualify for the general inherited-property basis adjustment, the beneficiary's starting basis would generally be $225,000 rather than the parent's original $25,000 cost.
| Item | Amount |
|---|---|
| Original purchase price | $25,000 |
| Value at date of death | $225,000 |
| Potential inherited cost basis | $225,000 |
| Gain if sold immediately for $225,000 | Approximately $0 |
If you later sell the shares for $245,000, the potential capital gain would generally be $20,000, before applicable adjustments, fees, or other tax considerations.
Does every inherited stock receive a step-up?
No. The general rule applies to many assets acquired from a decedent, but there are exceptions. For example, certain appreciated property previously gifted to the decedent by the beneficiary or the beneficiary's spouse within one year before death may retain the decedent's adjusted basis.
Trust ownership also requires careful review. Some assets held in trusts qualify for a basis adjustment, while others do not. The result depends on the trust's structure, ownership, and applicable estate tax rules. A trust does not automatically receive a step-up merely because someone associated with it has died.
The IRS explains inherited-property basis rules in Publication 551, Basis of Assets, and Publication 559, Survivors, Executors, and Administrators.
3. Do You Pay Capital Gains Tax When You Sell Inherited Stocks?
You may owe capital gains tax if you sell inherited stocks for more than their applicable cost basis. The gain is generally the difference between the sale proceeds and your adjusted basis.
Because inherited investments often receive a basis adjustment, the taxable gain is generally measured from the applicable inherited basis rather than the original owner's purchase price.
Example: Selling inherited shares after they appreciate
Assume you inherit shares worth $300,000 at the applicable valuation date, and that amount becomes your tax basis. You hold the shares for several months, and their value increases to $340,000.
| Item | Amount |
|---|---|
| Inherited value and assumed basis | $300,000 |
| Sale proceeds | $340,000 |
| Potential capital gain | $40,000 |
The potential taxable gain would generally be $40,000, not the entire $340,000 sale proceeds.
Are inherited stocks considered long-term investments?
Generally, inherited capital assets are treated as long-term property for capital gains purposes, regardless of how long the beneficiary actually held them. This can apply even when the beneficiary sells the shares shortly after receiving them.
The IRS discusses this treatment in Publication 550, Investment Income and Expenses.
What if inherited stocks decline in value?
If an inherited investment is worth less at the applicable valuation date than the original owner's adjusted basis, the beneficiary's basis may generally be adjusted downward. A later sale below that basis could produce a capital loss.
Dividends received after inheritance are a separate tax consideration and may be taxable in the year received. If the shares are held through an estate or trust, the reporting can involve additional documentation.
4. Should You Sell or Hold Inherited Stocks?
The decision to sell or hold inherited stocks should be based on the investment itself and your financial circumstances. A stock that was appropriate for the original owner may not be appropriate for you.
Reasons you might consider keeping inherited stocks
- The investment has a role in a diversified portfolio.
- The company and its risks fit your investment objectives.
- You have no immediate need for the proceeds.
- The position does not create excessive concentration.
- You would be comfortable purchasing the investment today.
Reasons you might consider selling inherited stocks
- The shares represent too much of your overall portfolio.
- You would not independently choose to purchase the investment today.
- You need liquidity for retirement, a home purchase, or other goals.
- You want to reduce exposure to one company or industry.
- You want to simplify multiple accounts and holdings.
- You have a different investment strategy that better fits your needs.
You can appreciate the history behind an inherited investment without being required to hold it indefinitely. The decision should account for both the emotional significance of the assets and the financial risks of keeping them.
Should you sell inherited stocks immediately?
Not necessarily. There is generally no requirement to sell inherited stocks immediately after receiving them. You can take time to review the portfolio, verify the cost basis, and develop a strategy.
However, waiting is not automatically the safer choice. If the inheritance consists primarily of one volatile stock, the portfolio remains exposed to that company's market risk while you decide what to do.
5. What If You Inherit a Large Position in One Company?
A concentrated stock position is one of the more significant investment challenges that can arise after an inheritance. A family member may have accumulated shares in one company over many years, particularly through employer stock, a successful investment, or a family business.
The shares may represent a substantial percentage of your inherited wealth and an even larger percentage of your total net worth.
Why concentrated stock positions can be risky
A portfolio heavily invested in one company is exposed to company-specific risks that a diversified portfolio can help reduce. Changes in management, competition, regulation, industry conditions, and business performance can all affect the share price.
Assume you inherit $1 million in shares of one publicly traded company. You also have $500,000 in retirement accounts and $200,000 in other investments.
The inherited stock represents approximately 59% of your $1.7 million investment portfolio. Even if the company has performed well historically, your financial future is heavily dependent on the performance of one business.
A decision to retain, reduce, or sell the position should consider the entire portfolio, not just the inherited account.
How can you diversify inherited stock?
Diversification does not necessarily require selling every inherited share at once. Depending on your circumstances, you may consider reducing the position, establishing a target allocation, or coordinating sales with other portfolio and tax decisions.
A gradual selling strategy can spread transactions over time, but it does not eliminate investment risk. Continuing to hold a concentrated position while waiting for a preferred tax outcome can expose you to further losses.
6. How Do You Transfer Inherited Stocks to a Brokerage Account?
Inherited stocks are often transferred from the deceased owner's brokerage account, an estate account, or a trust account into an account registered in the beneficiary's name.
The process depends on how the investments were owned and whether the estate or trust has completed the necessary administration.
- Confirm your entitlement. Obtain documentation establishing that you are entitled to receive the securities.
- Contact the current custodian. The brokerage firm can explain its inheritance and account-transfer requirements.
- Open an appropriate receiving account. The registration must be suitable for the type of distribution.
- Submit the required documents. These may include a death certificate, estate documents, trustee instructions, or beneficiary forms.
- Review the transferred investments. Confirm the share quantities, account registration, valuation, and reported cost basis.
Should you transfer inherited stocks in kind or sell them first?
An in-kind transfer moves eligible securities between accounts without selling them first. This can allow you to retain the investments temporarily while evaluating the portfolio and deciding what changes to make.
Selling before a transfer may make sense in other circumstances, but it is important to understand the tax consequences, account ownership, and any restrictions before proceeding.
If you plan to work with an investment advisor, the advisor can help coordinate the account transition with the current custodian and receiving brokerage platform. The advisor should also review whether the inherited investments are appropriate to retain or should be adjusted as part of the investment strategy.
7. Why You May Need an Estate Planning Attorney When You Inherit Stocks
Inherited investments are not always just an investment-management issue. The estate or trust documents can determine who owns the assets, who has authority to make decisions, and when beneficiaries are entitled to receive distributions.
An estate planning attorney can help interpret the relevant documents and address legal questions that arise during the transfer or administration of inherited assets.
When should you involve an estate planning attorney?
- You are receiving stocks through a trust and need to understand the distribution provisions.
- There are multiple beneficiaries or disagreements about how assets should be distributed.
- You are unsure whether you own the investments outright or remain a trust beneficiary.
- The trustee's authority or responsibilities are unclear.
- You need to review your own estate plan after receiving a substantial inheritance.
- There are questions involving probate, ownership, beneficiary rights, or trust administration.
How Inclinevest coordinates with estate planning attorneys
Investment decisions often need to be coordinated with the legal and administrative work involved in an inheritance. Inclinevest maintains professional relationships with estate planning attorneys and can work alongside your existing attorney or, when appropriate, help connect you with an attorney in our professional network.
With your authorization, we can coordinate the financial and investment aspects of the inheritance with the attorney handling the estate or trust. This can include reviewing how assets are expected to be distributed, identifying investment accounts that need attention, and planning for the management of the assets once they are available to you.
We can also coordinate with your CPA regarding cost basis records, investment sales, and tax reporting considerations. Legal advice remains the responsibility of your attorney, and tax advice and preparation remain the responsibility of your qualified tax professional.
8. Managing Inherited Investments at Charles Schwab With Inclinevest
Once inherited investments have been distributed to you, the next question is how to manage them. You may have several individual stocks, mutual funds, ETFs, and cash positions that need to be evaluated alongside your existing accounts.
Inclinevest Wealth Management provides ongoing investment management for individuals and families who want professional oversight of their investment portfolios. Client investment accounts are held at Charles Schwab, which provides custody and account services.
Independent Wealth Management. Investments at Schwab.
Inclinevest is an independent, fee-only registered investment advisory firm. We manage client portfolios independently, while Charles Schwab provides the custody and account infrastructure.
This arrangement allows us to make investment recommendations based on the client's financial situation and investment strategy rather than a proprietary product lineup.
Learn more about our financial planning and investment management services and fees.
What does working with Inclinevest look like?
The objective is to make the inherited investments part of a coordinated investment strategy rather than leaving you with a collection of accounts and individual holdings to manage on your own.
Can you transfer inherited stocks to Schwab without selling them?
In many cases, eligible stocks and other securities can be transferred in kind to a Schwab brokerage account without being sold first. Whether this is possible depends on the current custodian, account registration, security eligibility, and transfer requirements.
After the transfer, the investments can be reviewed as part of the advisory relationship. Some positions may be retained, while others may be sold or replaced based on the investment strategy and the client's circumstances. Any proposed sales should account for the available tax basis information and be coordinated with the client's tax professional as appropriate.
Have You Inherited a Brokerage Account or Stock Portfolio?
You do not have to manage the inherited investments on your own. Inclinevest can review the portfolio, help coordinate the transition to Schwab, evaluate concentration and diversification, and manage the assets as part of your broader financial plan.
If you are looking for an ongoing financial planning and investment management relationship, we welcome the opportunity to learn more about your situation.
Schedule an Introductory Call9. How Should Inherited Stocks Fit Into Your Financial Plan?
An inheritance can change your financial situation in ways that extend beyond the inherited brokerage account. The assets should be evaluated alongside your retirement accounts, existing investments, cash reserves, real estate, income, and future spending needs.
Review your complete investment portfolio
Looking at the inherited account in isolation can lead to decisions that do not make sense for your overall financial situation. Review your combined exposure to individual companies, sectors, domestic and international stocks, bonds, and cash.
Consider how the inheritance affects retirement
An inheritance may change how much you need to save, when you can retire, how much investment risk you need to take, and how you plan to generate retirement income.
Coordinate investment decisions with tax planning
Selling inherited stocks is only one part of the tax picture. Your existing portfolio may include unrealized gains, realized losses, dividend income, and other tax considerations. Coordinating investment decisions with your CPA can help evaluate the timing of sales and the effect on your overall tax situation.
Review your own estate plan
A substantial inheritance may also be a reason to revisit your estate planning documents, beneficiary designations, and plans for charitable giving or family gifts. Your estate planning attorney can help determine whether changes to your will, trust, powers of attorney, or other documents are appropriate.
10. Common Mistakes to Avoid When You Inherit Stocks
- Selling before confirming the cost basis: Incorrect basis information can lead to inaccurate tax reporting.
- Assuming every inherited investment receives a step-up: Trust ownership and other exceptions can change the result.
- Holding a stock solely because it belonged to a family member: The investment should still make sense for your financial circumstances.
- Ignoring concentration risk: A large position in one company can create significant portfolio risk.
- Making decisions based only on taxes: Avoiding a capital gain does not automatically make holding an investment the better choice.
- Overlooking dividends and other income: Income received after inheritance may have separate tax implications.
- Confusing inherited stocks with inherited retirement accounts: Brokerage assets and retirement accounts have different tax rules.
- Failing to coordinate with the trustee or executor: Account ownership and distribution authority matter.
- Overlooking legal and estate planning issues: Trust provisions and beneficiary rights may affect when and how investments can be distributed.
11. How Can a Financial Advisor Help With Inherited Investments?
Managing inherited investments can involve more than deciding which stocks to sell. You may need to verify cost basis, transfer assets between custodians, reduce concentrated positions, coordinate with a CPA, and understand how the inheritance changes your retirement or financial plan.
A financial advisor can help bring those decisions together and provide ongoing investment management after the inheritance has been received.
Inclinevest Wealth Management works with professionals, executives, business owners, retirees, and families who want an ongoing financial planning and investment management relationship. We can help evaluate inherited portfolios, develop an investment strategy, and manage eligible assets held at Charles Schwab.
Our work can also involve coordination with your CPA and estate planning attorney, particularly when investment decisions are connected to trust distributions, tax considerations, or changes to your estate plan.
We are a fee-only fiduciary registered investment advisory firm. Our investment management relationship is structured around ongoing advice and portfolio management, rather than commissions from selling investment products.
Let's Discuss Your Inherited Investments
If you have inherited stocks, a brokerage account, or a substantial investment portfolio, we can discuss what you received, what decisions need to be made, and whether an ongoing investment management relationship with Inclinevest makes sense.
An introductory conversation is an opportunity to understand your situation and determine whether we may be a good fit. There is no obligation to move forward.
Schedule an Introductory CallFrequently Asked Questions About Inherited Stocks
What should I do with stocks I inherited?
Start by obtaining a complete list of the inherited investments, confirming their cost basis, and understanding how the shares will be transferred. Then evaluate whether to keep, sell, or diversify the investments based on your overall portfolio, financial goals, and tax situation.
Should I sell inherited stocks immediately?
Not necessarily. There is generally no requirement to sell inherited stocks immediately. You can evaluate the investments, confirm their cost basis, and determine whether they fit your financial plan before making a decision. Holding a concentrated or unsuitable investment also carries market risk.
Do inherited stocks get a step-up in cost basis?
Generally, inherited stocks receive a basis adjustment to their fair market value at the date of death, subject to exceptions. Certain trust arrangements and appreciated property previously gifted to the decedent by the beneficiary or the beneficiary's spouse within one year before death require additional analysis.
Do I pay capital gains tax when I sell inherited stocks?
You may owe capital gains tax if you sell inherited stocks for more than their applicable cost basis. Because inherited assets generally receive a basis adjustment, the taxable gain is often measured from the applicable inherited value rather than the original owner's purchase price.
Are inherited stocks considered long-term capital gains?
Generally, inherited capital assets are treated as long-term property for capital gains purposes, regardless of how long the beneficiary actually held them.
Can I transfer inherited stocks without selling them?
In many cases, eligible inherited shares can be transferred in kind from an estate or brokerage account into an eligible account in the beneficiary's name. The required documents and procedures depend on the ownership and distribution arrangements.
Can I transfer inherited stocks to Charles Schwab?
In many cases, eligible securities can be transferred to a Schwab brokerage account without selling them first. The transfer depends on the current custodian, account registration, security eligibility, and required documentation.
Can a financial advisor manage inherited stocks?
Yes. Depending on the account ownership and advisory arrangement, a financial advisor can manage eligible inherited investments as part of an ongoing investment management relationship. This may include portfolio review, diversification, investment monitoring, and coordination with your other financial professionals.
Can an estate planning attorney help with inherited stocks?
An estate planning attorney can help interpret trust documents, address beneficiary rights, and advise on estate or trust administration. A financial advisor can coordinate with the attorney on investment-related decisions and the management of assets after distribution.
Do stocks inherited through a trust receive a step-up in basis?
Not automatically. The basis treatment depends on the trust's ownership structure and whether the assets qualify under the applicable inherited-property rules. The trust document and relevant tax records should be reviewed before selling the shares.
Should I keep inherited company stock?
It depends on the company's investment prospects, your existing portfolio, concentration risk, financial goals, and tax circumstances. A large position in one company can expose your portfolio to significant company-specific risk.
How can Inclinevest help manage inherited investments?
Inclinevest can review inherited stocks and brokerage accounts, evaluate diversification and concentration risk, help coordinate eligible asset transfers to Schwab, and manage the portfolio as part of an ongoing financial planning and investment management relationship. We can also coordinate with your CPA and estate planning attorney when appropriate.
Gabriel Motta, CFP®, MBA, AWMA™
Gabriel Motta founded Inclinevest Wealth Management and has worked in financial services since 2004. His background includes wealth planning at UBS Financial Services and leadership roles at U.S. Bank, BBVA, and other financial institutions.
At UBS, he completed hundreds of financial plans for high-net-worth and ultra-high-net-worth households. Today, he works with professionals, executives, business owners, retirees, and families on financial planning and investment management.
Gabriel holds the CERTIFIED FINANCIAL PLANNER™ certification, an MBA, and the Accredited Wealth Management Advisor™ designation.
Read Gabriel's full biography or learn more about Inclinevest's services and fees.
Disclosure: This article is for general educational purposes only and should not be considered individualized investment, tax, or legal advice. The tax treatment of inherited assets depends on applicable federal and state laws, ownership structure, trust provisions, and individual circumstances. Cost basis and valuation should be confirmed with the estate representative, trustee, brokerage firm, or qualified tax professional. Consult your CPA and estate planning attorney before making decisions involving inherited investments. Investment advisory services involve risk, including the possible loss of principal. Inclinevest Wealth Management is an independent, fee-only registered investment advisory firm. Advisory services are provided in accordance with applicable agreements and disclosures. Charles Schwab is a separate unaffiliated company and does not endorse or sponsor this article or Inclinevest Wealth Management.
