A lot of investors don’t know what their cost basis is when they inherit stock from someone who’s passed away. Tom put together a short video explaining the answer to this question.
When somebody passes away with stock in their portfolio, the first thing that needs to be calculated is the date of death valuation for each stock. This is done by taking the high and low price from the owner’s date of death. The average price per share is determined from those numbers. The average price per share multiplied by the number of shares owned provides the date of death valuation.
The date of death valuation of inherited stock becomes the new owner’s cost basis. This is referred to as the stepped up cost basis. The cost basis of the original owner is no longer relevant for the inheritor.
Inheriting stock can be confusing for some investors. We recommend that they consult with an investment advisor before making any decisions regarding investments.
