Leaving and Inheriting Shares and Stocks in An Estate Plan

Among the many things that we plan to leave to our loved ones, or that we may expect to inherit from loved ones, are intangible assets—specifically, shares or stocks. But unlike other assets that are left and inherited through an estate plan, stocks can create some special situations that should be dealt with, when creating your estate plan.

Should You Liquidate the Shares?

The first question if you have shares or stock to be left in an estate plan, is what to actually do with them.

You can, in your estate plan, order that the shares be liquidated and then given to or divided between whomever you may choose. The problem with that is that if you should pass away when the stock market or those shares are lower in value, your beneficiaries may lose out on the option to hold onto them until they increase again.

Using a Trust and a Trustee

You may not want the shares sold or liquidated—in fact you may specifically want to mandate that they be held for a certain period of time or if and until they reach a certain value. If that’s the case, you’ll need to put them in a trust, where you can ensure that they are not liquidated as per your wishes.

With a trust, you can also appoint a trustee over the shares in the event you want the money invested and reinvested—that is, if you want the trustee to have some ability to sell bad performing stocks and reinvest the funds into better performing stocks or other financial vehicles.

If that’s the case, you’ll need a trustee with skills or experience in investments. Many professional wealth managers or other financial institutions or investment professionals, have the ability to do that for you. Of course, if you have savvy beneficiaries who have financial knowledge themselves, some may have issues with the trustee’s financial decisions over time.

Dividing Shares Equally

One problem with leaving in-tact shares (those that aren’t to be liquidated) in your estate plan, is valuing them. If they are all being left to one person, this may not be a problem. But if you are leaving shares to multiple beneficiaries, and you want each to have an about even amount of those shares, you’ll have to have an accurate value for the shares.

And even if you do have an accurate value, share values are volatile. An equal distribution of shares to multiple beneficiaries today, may not be so equal if the shares eventually get distributed 1, 5, or 10 years later.

Tax Issues

You may want to discuss with your beneficiaries, tax consequences of shares. Shares that increase in value, or beneficiaries who may immediately liquidate inherited shares for the cash value, may end up with an unexpected tax burden.

Need to create a will, trust or other estate planning document? Call the West Palm Beach estate planning lawyers at The Law Offices of Larry E. Bray today for help with your estate planning needs.

Sources:

fool.com/investing/how-to-invest/stocks/transferring-stock-after-death/

investopedia.com/terms/i/inherited-stock.asp