What is an inherited stock?

Definition of Inherited Stock

Inherited stock refers to shares of a company that have been passed down from an investor to an heir. “Inherited stock” is a completely literal term. It simply refers to individual shares that have been inherited.

Definition and Examples of Inherited Stock

Inherited stock means that the securities have been passed on to another person after the death of the person who gave them and differs from gifted stock, which includes shares given as a gift during the person’s lifetime. Inherited stock specifically refers to the inheritance of individual securities.

How Does Inherited Stock Work?

Inherited stock works by transferring shares from an investor to an heir, such as indicating this desire as part of their estate plan. After the original investor’s death, the heir receives the inherited shares and can use them as they wish.

What Does Inherited Stock Mean for Individual Investors?

If you want to pass on assets to others such as family or friends, consider the tax implications and timing. While you may want to give the stock to your children now, this could result in paying more taxes compared to inheriting the stock after your death.

For individual investors receiving or expecting to receive inherited stock, they should take these tax rules into account. If there is a great selling opportunity within a year of receiving the stock, for example, you might decide to take advantage of that since you could pay long-term capital gains taxes instead of waiting a full year for ownership.

This is some basic information about inherited stock, how it works, and what it means for individual investors. Investors should consult tax professionals or legal estate executors if there are alternative applicable dates.

References:

– Fidelity. “Cost Basis.” Accessed on August 12, 2021.

– Charles Schwab. “Can You Give Stock as a Gift? Should You?” Accessed on August 12, 2021.

– H&R Block. “Holding Period.” Accessed on August 12, 2021.

– Internal Revenue Service. “Topic No. 409 Capital Gains and Losses.” Accessed on August 12, 2021.

– Internal Revenue Service. “IRS Provides Tax Inflation Adjustments for Tax Year 2021.” Accessed on August 12, 2021.

Source: https://www.thebalancemoney.com/inherited-stock-5197388