What to Do with Inherited Stocks
Inheriting stocks can be a significant financial windfall, but it also comes with its own set of challenges and decisions. Whether you’re dealing with a small portfolio or a substantial one, knowing what to do with inherited stocks is crucial. This article will guide you through the process of evaluating, managing, and ultimately deciding on the best course of action for your inherited stocks.
Evaluating the Inheritance
The first step in determining what to do with inherited stocks is to thoroughly evaluate the portfolio. This involves understanding the types of stocks you’ve inherited, their current market value, and their potential for growth or decline. It’s important to gather all relevant information, including the stock certificates, brokerage statements, and any other documentation related to the inheritance.
Understanding the Tax Implications
Inheriting stocks can have tax implications, so it’s essential to understand the tax laws in your jurisdiction. Generally, inherited stocks are subject to capital gains tax when sold, but the good news is that the tax basis is typically adjusted to the market value on the date of the original owner’s death. This can significantly reduce the capital gains tax liability.
Reviewing Investment Strategy
Consider the original owner’s investment strategy and your own financial goals when reviewing the inherited stocks. If the original owner was a conservative investor, you may want to maintain that strategy. However, if you have different investment goals or risk tolerance, you may need to adjust the portfolio accordingly.
Seeking Professional Advice
Don’t hesitate to seek professional advice from a financial advisor or a tax expert. They can provide valuable insights into the best course of action for your inherited stocks, taking into account your financial situation, investment goals, and tax implications.
Divesting or Holding Onto Stocks
Once you’ve evaluated the portfolio and sought professional advice, you’ll need to decide whether to divest or hold onto the stocks. If the stocks are not performing well or don’t align with your investment strategy, selling them may be the best option. However, if the stocks have strong potential for growth or are part of a diversified portfolio, holding onto them might be the better choice.
Rebalancing the Portfolio
After making a decision on what to do with the inherited stocks, it’s important to rebalance your portfolio. This ensures that your investments are aligned with your financial goals and risk tolerance. Rebalancing may involve selling some stocks and reinvesting the proceeds into other assets or increasing the allocation to certain sectors or industries.
Monitoring and Reviewing
Finally, it’s crucial to monitor and review your inherited stocks regularly. Keep an eye on market trends, company performance, and your own financial goals. Adjust your strategy as needed to ensure that your inherited stocks continue to serve your financial objectives.
Inheriting stocks can be a complex process, but by carefully evaluating the portfolio, understanding the tax implications, seeking professional advice, and making informed decisions, you can effectively manage your inherited stocks and turn them into a valuable asset for your future.
