Liquidate financial assets
Selling financial assets is a viable strategy as it can minimize the financial risk of losing money in an untimely stock market correction (drop). Stocks and bonds go up and down in value with the market. Markets can be tremendously volatile, and with that, the value of assets can swing tremendously. Talk to a highly qualified financial adviser but consider selling at least some stocks and bonds to minimize the risk of loss in capital. Before you sell any stocks, however, check the will to see if specific shares of stocks are in accounts like IRAs and 401Ks left to beneficiaries. If this is the case, consult a professional as to whether the stock should be transferred or sold and the profit transferred.
Before you liquidate an IRA account, consider a unique investment vehicle called an Inherited IRA, as it may offer a significant tax advantage. A beneficiary can take a lump sum distribution or choose to let the IRA continue to grow, with taxes deferred through an Inherited IRA. With an Inherited IRA, the beneficiary receives payments annually over his or her expected lifetime, with any undistributed amounts released to his or her estate at death. With an Inherited IRA, the tax deferment is of great value in most cases because money you would have paid in taxes can earn interest for you for many years.
Selling specific financial assets is often not a question of “if” you will sell, but when. If the dividend payment dates are only days or weeks away, you might want to consider waiting until the dividends post before selling an asset. Again, a financial advisor and tax accountant should be consulted as your best approach might differ based on the specifics of the estate. Your guiding principle should be minimizing risk, not maximizing market return. Additionally, the proceeds to these sales might be needed to pay other expenses or federal or state taxes due.
One final exception to the sale of specific stocks can be shares of a stock that have great sentimental value. For instance, if the deceased was the employee of a company for her whole career and has shares as a part of that company’s stock program, you might choose to distribute those shares to heirs, versus liquidating that stock.