Inheriting Stock Or Shares Through A Will Or Trust

If you inherit stock, or shares in a company, you may be elated at the idea of owning something that can go up in value, especially if the shares are valuable. But shares can go up and down in value, and can be held or liquidated, and which of that happens, may depend on the estate plan that left you the shares to begin with.

Inheriting Through a Will or Trust

Normally, if shares are included in a will, the will is going to say whether the shares will be liquidated and then the proceeds divided, or whether the shares themselves will just be given to whomever is the designated beneficiary.

Trusts are a little different, because the creator (the testator) likely intended for the shares to remain in trust for some time, and to be managed by the trustee. That means that while you may realize some return from the money the shares generate, you may not be completely free to do what you want with the shares, because they are owned by the trust, and managed by the trustee.

The trust also will usually give the trustee the ability to invest the shares however he or she sees fit, or give instructions on when and how to sell or liquidate the shares.

Sometimes, shares are controlled by a payable on demand (POD) account. This is the easiest scenario, because the shares will transfer outside of probate, and whomever is designated to get the shares, will get them automatically.

The Role of the Executor

If shares are part of the estate, and thus, have to go through probate, the personal representative or executor will have large discretion to determine whether to continue to invest the shares, whether to distribute the shares, or whether to liquidate them and then distribute the proceeds.

Often, when there are multiple beneficiaries, it may be easier to just liquidate the shares and divide the proceeds amongst beneficiaries as designed in the will. Otherwise, the shares have to be valued to ensure that all beneficiaries are getting the percentage interest that the will or trust designates that they get. That will incur more time and expense for the estate and the executor.

Executors have to act in the best interests of the beneficiaries, and often, that isn’t so easy to determine. Many executors may have to obtain an attorney to assist (attorneys fees can be asked for through the probate court if necessary).

Beneficiaries can challenge the executor, for example, if one option would be more likely than another to maximize return for the designated beneficiaries.

After Shares are Inherited

At whatever point the shares themselves are inherited by a beneficiary, the beneficiary can then liquidate the shares in any way that they want to. Just be careful—one time, sudden liquidation of shares can end up having a significant tax impact. Simply inheriting shares, without selling them, won’t normally have any immediate tax impact.

Call the Torrance probate will and estate attorneys at Samuel Ford Law today for help with what to do with your shares or stocks in your estate plan.

Sources:

fool.com/investing/how-to-invest/stocks/transferring-stock-after-death/

investopedia.com/terms/i/inherited-stock.asp