Inheriting a Brokerage Account: Do You Have to Sell the Investments?

Who can sign the paperwork?

Notify the brokerage of the death and ask for its estate-services team. Request a written list of documents for this particular account. The requirements depend on how the account was owned and whether it had a named beneficiary.

A death certificate is usually needed. The firm may also need court papers naming an executor or documents identifying a successor trustee. Ask who must sign and in what role.

FINRA says firms generally need to establish legal authority and open the receiving account before permitting trades or a move to another brokerage. If the firm rejects a form, ask exactly what needs correcting.

Which investments can move without a sale?

Give the receiving firm the list of investments and ask it to check each one. Stocks, bonds, and many funds can move in kind, but the firm must accept the exact investments you own.

Vanguard, for example, accepts a range of stocks, bonds, and funds while excluding certain other investments. Eligibility depends on the investment, the account registration, and any restrictions. A general promise to transfer an account isn't an answer for every holding.

Some funds sold only by the original firm, private investments, and fractional shares may not transfer. Ask how the firm proposes to handle anything it cannot accept. Use these questions when reviewing its answer.

Check the new account before signing

The application asks about your income, experience, goals, and comfort with investment risk. Answer for yourself. Your needs may be quite different from your parent's.

Pay attention to the account type. A cash brokerage account can hold stocks and funds. "Cash" means you pay in full for investments you buy, without borrowing from the broker. It does not mean inherited shares must be sold.

A margin account lets you borrow against securities. Borrowing brings interest charges and the possibility of larger losses. The SEC warns that some applications make margin the default, so check what you're choosing.

Read the fees and trading permissions too. Ask where uninvested cash goes and what protection applies. A bank deposit and a money market fund have different terms and risks.

You can choose another brokerage

You can keep the investments at the original firm or choose a different one. Compare account fees and services, and check the broker's background through FINRA BrokerCheck or the SEC's investor search.

If you choose to move, ask the receiving firm how to begin once the inheritance paperwork is complete. Match the transfer instructions to the account records. Check the transfer fees and whether trading will be restricted during the move.

Ask for a timeline that accounts for your paperwork and investments. An estimate for moving an ordinary account between firms does not tell you how long the inheritance process will take.

Check the tax basis before selling

Tax basis is the amount used to work out a gain or loss when you sell. For inherited property, the IRS says it is generally the market value on the date of death. A different valuation date can apply if the executor makes the required election on an estate tax return.

Ask the executor for the valuation records and compare them with the basis shown in your account. Your parent's original purchase price may be the wrong figure. Have your tax preparer resolve any discrepancy before you rely on it.

Selling for more than the applicable basis creates a taxable gain. Keep the valuation records with your statements, even if you plan to hold the investments for now. The related guide to step-up in basis explains this in more detail.

Make sure everything arrived

Compare the first statement from the receiving firm with the transfer records. Check investment names, share counts, cash, and fees. Prices change, so matching the total account value alone won't tell you whether all the shares arrived.

Report missing investments, unexplained fees, or trades you didn't authorize promptly by phone and in writing. Keep your instructions and the firm's replies.

Once the transfer is settled, review the investments against your own needs. Receiving shares leaves you with a separate decision about what to keep or sell.