15 Oct Using inherited stocks to pay for a wedding

Q. I have stocks that I inherited from my father 10 years ago. He purchased them decades before and I have no idea how to calculate the cost basis when I finally sell, which I think will be soon to help pay for my daughter’s wedding. How can I do this?
— Dad of the Bride

A. Good luck with your daughter’s upcoming wedding!

Here’s what you need to know about cost basis.

Assets such as stocks inherited from a decedent are revalued for purposes of determining the cost basis that beneficiaries should use when eventually selling the stock, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.

“The executor of the estate can choose from either the date the decedent died or a date six months after the date of death – if the value of the estate is lower six months later – in valuing the decedent’s assets for purposes of determining if any estate tax is due,” Hook said.

So if an estate tax return was filed when your father died, you can look at the return to see what the stocks were valued at on the return and that becomes your cost basis, Hook said.

If no estate tax was filed, then you can look up the high and low price of the stock on the date of death and use the average of the two as your cost basis, he said.

“If after you inherited the stock it paid dividends which you reinvested – bought more shares – you will need to add the amount of reinvestments to the cost basis you calculated on the date of death to come up to the total cost basis,” Hook said.

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This story was originally published on Oct. 15, 2019.

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