Q: The value of an asset is established through probate as of date of death. How do increases/decreases get reconciled?
For example; a stock portfolio will increase or decrease during the time of probate. How do those gains/losses get distributed?
A:
If you inherit real estate or any stocks that are held outside of an IRA or 401(k), then in the year when you sell the real estate or stock you may incur capital gains taxes based on the difference between the inherited value of the property (which receives a “stepped up basis” as of the date of death) versus the sales price that you receive.
The asset technically becomes the beneficiary's at death subject to debts of the estate; therefore, any gains in value may be subject to capital gains tax during the year you sell the stock.
Capitals gains questions are best handled by a tax attorney or accountant familiar with probate.
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