The tax you are probably not going to owe

The basis of property acquired from someone who has died is generally its fair market value at the date of death — not what they paid for it. Decades of appreciation during their lifetime are simply not taxed to the person inheriting. Only movement after the date of death is a gain.1

The practical consequence is large. Shares bought for a small sum in the 1980s and worth a great deal now can often be sold shortly after the death with almost no taxable gain at all. The family that has been avoiding the subject because it feared the tax has usually been avoiding nothing.

A second rule removes the other worry. Inherited property sold within a year of the death is still treated as held long-term, so selling quickly does not push the gain into the higher short-term rate.2

There is one thing you must actually do: establish and record the date-of-death value of every holding, in writing, at the time. Ask the brokerage for a date-of-death valuation statement. Reconstructing it three years later, when the account is finally sold, is difficult and expensive — and without it the reset is hard to prove.1

Two important exceptions. Retirement accounts do not work this way at all — an inherited IRA or 401(k) carries its own rules and there is no basis reset on the pre-tax money. And in community property states, the treatment of jointly held assets can differ in the survivor's favor, which is a question worth asking rather than assuming.

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Sahvelo gives information drawn from statutes, agency guidance and official forms. It is not legal advice for your particular situation. Terms & disclaimer.

Transfer first, decide later

The instinct on inheriting an investment account is to liquidate it. That is usually the wrong first move, and it is irreversible.

Securities can normally be transferred in kind — moved as the same shares into an account in the beneficiary's or the estate's name — without being sold. Doing that separates two decisions that should not be made together: getting legal control of the assets, which is urgent, and deciding what to hold, which is not.

  • Ask for a transfer in kind explicitly. Some brokerages default to liquidating, and a beneficiary who does not ask may find the portfolio sold.
  • Selling in a falling market to satisfy a deadline nobody actually imposed is a frequent avoidable loss here.
  • Where several beneficiaries share an account, transferring in kind into separate accounts first lets each of them decide independently.
  • Do not stop dividend reinvestment or make trades in a sole-name account before you have authority. Trading in the deceased person's account is a problem even when the intention is good.

What a brokerage will actually want

Brokerages are slower than banks and more document-driven, and each has its own estate department with its own forms. What they ask for is broadly consistent.

  • A certified copy of the death certificate. Expect to provide one per institution.
  • The court document appointing the executor or personal representative, for a sole-name account with no beneficiary.
  • The firm's own transfer or letter of authorization forms, which usually cannot be substituted.
  • A tax identification number for the estate, where the assets are moving into an estate account rather than to a named beneficiary.
  • A new account, opened in the beneficiary's or the estate's name, for the securities to move into.
  • For a trust, the trust instrument or a certification of trust, plus the successor trustee's identification.

Expect weeks, not days, and expect to send the same document twice. Ask at the first call for a single named contact in the estate department and a written list of everything required — that one request removes most of the delay.

The loose ends nothing warns you about

  • Income is split at the date of death. Dividends and interest paid before it belong on the deceased person's final return; anything after it belongs to the estate or the beneficiary. The brokerage will issue tax forms that need reading carefully, and they are frequently wrong in the first year.
  • Margin loans and options positions do not wait. A margined account can be sold out from under an estate, and options expire on their own schedule. If either exists, that is the urgent part of this topic.
  • Old paper share certificates in a drawer are still real and are transferred through the company's transfer agent rather than through a brokerage. It is slow and it needs a different form.
  • Fractional shares, dividend reinvestment plans and employer stock purchase plans are often held directly with a transfer agent rather than at any brokerage, so they do not show up on any statement the family has.
  • Employer stock may carry its own tax treatment worth advice before selling, particularly where it sits inside a retirement plan.

How this works at each firm

First: how was the account held?

The same decisive fact as a bank account, and it is on the statement. It decides whether the assets pass immediately, wait for a court, or never enter the estate at all — and no amount of paperwork changes the answer.

How it was heldWhat happensWhat you do
With a transfer-on-death registration or named beneficiary The securities pass directly to the named person, outside the estate and outside the will. No court authority is needed. The beneficiary opens an account at the same firm, provides a certified death certificate and identification, and asks for the holdings to be transferred in kind — plus a date-of-death valuation statement.
Jointly, with right of survivorship The surviving owner already owns it, and the account does not wait for probate. Have the deceased owner removed and ask for a date-of-death valuation. In a community property state, ask specifically how basis is treated on the survivor's half, because it may be better than you expect.
Sole name, no beneficiary named It becomes part of the estate. Nobody has authority until an executor or personal representative is appointed, or a small-estate procedure applies. Notify the firm so the account is flagged and no trading occurs, then wait for authority. Ask whether a margin balance or expiring options need attention in the meantime — that is the one thing that cannot wait.
Held by a trust The successor trustee takes over under the trust's terms, without probate. Provide the trust instrument or a certification of trust with the death certificate and identification, and administer according to the trust rather than the will.
It is a retirement account, not a taxable one A different topic entirely. Beneficiary rules are federal, distribution deadlines apply, and there is no basis reset on pre-tax money. Do not treat it like a brokerage account and do not move the money before reading the inherited-account rules — a wrong transfer can be irreversible and taxable.

The procedure, at each firm

The order is deliberate. One step is time-sensitive, one is easy to lose forever, and the rest can take as long as they take.

  1. Read the statement before making a single call

    The registration line tells you how the account is held, and that decides everything else. Guessing, or repeating what the family believes, is what produces three weeks of the wrong process.

  2. Check for margin, options and anything expiring

    These do not wait for probate. Tell the firm's estate department immediately if any exist, and ask what will happen if nobody has authority when a deadline arrives.

  3. Notify the estate department and freeze trading

    Ask for the estate or deceased-account services department by name, not the general line. Confirm that no trades or transfers can occur without authority.

  4. Ask for a date-of-death valuation statement in writing

    This is the step that is easy to skip and hard to recover. It is the evidence for the basis reset, and it is trivial for the firm to produce now and awkward later.1

  5. Establish authority, or claim as beneficiary

    A beneficiary or joint owner claims directly. A sole-name account waits for the court appointment or a small-estate procedure, and the firm will name the exact document it requires.

  6. Transfer in kind into a new account

    Say the words "transfer in kind". Get control of the assets first and decide what to hold afterwards.

  7. Check the tax forms the firm issues

    Income has to be split at the date of death between the final personal return and the estate. First-year forms are often wrong, and correcting one is much easier than explaining it later.

What to ask for by name

  • "Your estate services or deceased account services department" — not the general customer line and not the local branch.
  • "A date-of-death valuation statement for every holding."
  • "Transfer in kind" — say it explicitly, so nothing is liquidated by default.
  • "How is this account registered?" — the answer decides the whole process.
  • "Is there a transfer-on-death registration on this account?"
  • "Is there a margin balance, or any options position with an expiry?"
  • "A single named contact and a written list of everything you require."
  • "Your transfer agent contact", for paper certificates or direct-registered shares.

Questions people ask about this

  • Do we owe capital gains tax on everything it grew by?

    Generally no. Basis resets to the fair market value at the date of death, so growth during the deceased person's lifetime is not taxed to you. Only movement after the date of death is a gain — and if you sell within a year, it is still treated as long-term. Get the date-of-death valuation and the arithmetic usually becomes small.12

  • Should we sell now or hold?

    That is an investment question rather than a legal one, and Sahvelo will not answer it. What this page can say is that the tax consequence of selling soon after a death is usually smaller than families fear, so the decision can be made on its merits rather than out of tax anxiety. Transfer in kind first so you are not forced to decide on someone else's timetable.

  • We think there were investments but we cannot find any statement.

    Start with the last two years of tax returns: every institution that paid a dividend or interest reported it, and the return names them. Then check the bank statements for transfers out, and search state unclaimed property, where dormant accounts eventually land. Directly registered shares and reinvestment plans sit with a transfer agent and appear on no brokerage statement at all.

  • The account is to be split between three of us.

    Ask for it to be transferred in kind into separate accounts, one per beneficiary, before anything is sold. Each of you then decides independently, and nobody's tax position or timing is dictated by the others'. Splitting after a sale is much messier.

  • The account is worth less now than at the date of death.

    Then selling may produce a deductible loss rather than a gain, measured from the date-of-death value. That is a real and often overlooked outcome, and it is another reason the date-of-death valuation matters regardless of which direction the market moved.1

  • We found paper share certificates in a drawer.

    They are probably still valid, even for a company that has since been renamed or acquired. Transfer runs through the company's transfer agent rather than a brokerage, needs its own forms, and takes longer. Do not throw away anything that looks like a certificate, however old.

Where this sits in the process

Before this

These produce something this topic needs.

This makes possible

Finishing this unblocks these.

  • Taxesthe date-of-death split and the basis figures feed both returns

Related

Sources

Two federal statutes carry the part that changes the money; everything institutional varies by firm.

  1. 26 U.S.C. §1014 (Basis of property acquired from a decedent) — Legal Information Institute

    Basis resets to the fair market value at the date of death.

    law.cornell.edu Checked 2026-08-12

  2. 26 U.S.C. §1223(9) (Holding period of property acquired from a decedent) — Legal Information Institute

    Inherited property sold within a year still counts as long-term.

    law.cornell.edu Checked 2026-08-12

Sources last reviewed 2026-08-12. Where a source is marked pending re-verification, the page says so wherever the claim appears.

The basis rule and the holding-period rule are quoted from the federal statutes that set them. How a particular firm handles a transfer, and what its estate department requires, is that firm's own procedure — which is why this page tells you what to ask for rather than what the form is called. Whether to sell is an investment decision Sahvelo does not make, and community property treatment and employer stock both warrant an accountant rather than a page.