Inheriting stocks can bring mixed emotions. You may feel grateful for the financial gift, but also uncertain about the best next steps. 

This is especially true if investing isn’t something you’ve actively managed before. If you’re wondering what to do with inherited stocks, it’s worth stepping back and looking at the entire picture before making quick moves.

At Heritage Wealth Retirement Planning, we help individuals and families make confident decisions about assets they’ve received, including stocks. 

Whether you decide to keep, sell, or diversify, the choice should fit into your overall financial plan. If you’d like to talk about your situation, call (630) 868-9127 to connect with our team.

Taking Time to Understand What to Do With Inherited Stocks

For many people, the question of what to do with inherited stocks begins with understanding the basic options. In general, you can:

• Keep the shares as part of your investment portfolio

• Sell some or all of the shares for immediate cash or to reinvest in other assets

• Transfer ownership into another type of account, such as a trust or a joint account with a family member

• Donate shares to a charitable cause, which may offer tax benefits

Each of these paths has its pros and cons, and the “right” choice often depends on your personal goals, current portfolio, and financial needs.

First Steps Before You Make Any Moves

Before deciding, it’s worth taking a short pause to get all the facts. Jumping into a sale or transfer without preparation can lead to missed opportunities and unexpected tax bills.

Identify the Type of Account

If the inherited stock were in a taxable brokerage account, it would follow one set of rules. If it were in a retirement account such as an IRA, different rules apply — including deadlines for withdrawals and required minimum distributions (RMDs).

Find Out the Cost Basis

Most inherited assets get a “step-up” in cost basis to the market value on the date of the original owner’s passing. This can significantly reduce the taxable gain if you sell the stock shortly after inheriting it.

Learn About the Company and Sector

Do some homework on the company whose stock you’ve inherited. Look into its performance history, dividend payout record, and current market conditions. This helps you see whether holding it fits your risk tolerance and long-term strategy.

Considering the Emotional Side

Inherited assets often carry emotional weight. The person who left you the stock might have chosen it for reasons you don’t fully know, or it might be a company they believed in for decades. 

While it’s natural to feel sentimental, decisions about what to do with inherited stocks should also take into account your current financial picture and future needs.

For example, holding a large single stock just because it has a family connection could leave your portfolio exposed to unnecessary risk. Balancing respect for the inheritance with sound investment principles is key.

The Role of Taxes in Your Decision

Taxes often play a bigger role in your decision than you might expect. In many cases, the stepped-up cost basis means that if you sell the inherited stock soon after receiving it, your taxable gain may be minimal. 

However, waiting months or years could result in larger gains and larger tax bills.

If you plan to sell, consider timing the transaction to spread gains over more than one tax year. If you plan to hold, keep track of dividend income, as that may also be taxable.

The IRS provides detailed guidelines on inherited property and capital gains, but these can be complex. This is where working with a financial professional can help you avoid costly mistakes.

Discussing Your Options in Detail

1. Keeping the Stocks Long-Term

If the stock represents a stable, dividend-paying company, holding it could provide steady income and potential growth. You might reinvest the dividends to buy more shares or use them as supplemental income.

However, holding too much of one stock can be risky. If the company faces trouble, your portfolio could take a big hit. We recommend reviewing how much of your total investments this stock represents before committing to a long-term hold.

2. Selling the Stocks

Selling allows you to diversify, pay off debt, or invest in assets better aligned with your goals. If you choose to sell, consider whether to do it all at once or in stages. Selling gradually can help manage taxes and market risk.

3. Reinvesting Proceeds

If you sell the inherited stock, the proceeds could be used to invest in a diversified portfolio. This might include index funds, bonds, real estate investment trusts (REITs), or other assets that better match your risk tolerance and income needs.

4. Donating Shares to Charity

Donating appreciated stock can provide tax benefits. You can avoid paying capital gains tax while also receiving a charitable deduction, depending on your circumstances. This approach can also honor the values of the person who left you the shares.

How a Financial Plan Shapes the Decision

The best decision is rarely made in isolation. At Heritage Wealth Retirement Planning, we look at how the inherited stock fits into your entire financial picture.

Questions to ask yourself:

• How does this stock fit into my overall asset allocation?

• Do I need liquidity now, or can I hold it for the long term?

• Will selling help me reach other financial goals sooner?

• Does holding this stock keep my portfolio too concentrated?

When we work with clients, we use these questions as a starting point to create a strategy that’s both practical and personal.

Mistakes to Avoid

Some of the most common mistakes we see include:

• Selling immediately without understanding tax implications

• Holding an underperforming stock for sentimental reasons

• Failing to diversify after inheriting a large single position

• Ignoring the impact on long-term retirement planning

Avoiding these can help you make the most of the inheritance without creating unnecessary risks.

Taking the Next Step

Knowing exactly what to do with inherited stocks means combining financial facts with personal priorities. Whether you keep them, sell them, or donate them, the decision works best when it’s part of a bigger plan.

At Heritage Wealth Retirement Planning, we guide you through each step so your choice reflects both the meaning of the gift and your financial future.

Call (630) 868-9127 to schedule a consultation.