After your spouse dies, you become the sole owner of the stock.
If you are asking this question, you have lost someone you love.
I am sorry.
You want to sell stock you held jointly.
According to a recent Kiplinger article titled “Selling Jointly Owned Stock After the Death of a Spouse,” you should consider how the gains will be taxed.
The stock now belongs to you.
No probate is necessary.
How do you finalize this?
Call the brokerage firm.
The financial institution will instruct you regarding the documents you will need to provide.
Usually a death certificate is all that is needed to secure title in your name alone.
Because you own the stocks, you have the right to sell.
How will the taxes on be calculated when you sell?
This will depend largely on where you live.
In some states the capital gains will be calculated with half of the investment being stepped up.
What does this mean?
The gains or losses on the half belonging to your spouse will be based on the value at the time he or she died.
Your half will be calculated based on the value of the stock when it was purchased.
How does this work?
Here is an example.
You and your spouse purchased stock for $20,000.
The stock increased in value to $70,000 when your spouse passed.
The half belonging to your spouse is stepped up to the $35,000.
Your half still holds the original basis at $10,000.
You sell the stock for $80,000.
How will be taxed?
You will be taxed on the capital gains.
How is the capital gains calculated?
Subtract the basis for your half and the half belonging to your spouse from the amount you received for the stock.
In this example, this would be $80,000 minus $45,000.
The capital gains total?
You will be taxed on this amount.
What if you live in a "community property" state?
The calculation will be different.
The entire investment will be stepped up.
We will use the same numbers as the previous example.
The stock is worth $70,000 when your spouse died.
You again sold the stock for $80,000.
You will be taxed on the difference between these.
In this example, you would be taxed on $10,000.
How do you know the original value of the investment?
Ideally you would have kept records for the investment.
Do not have these?
Do not panic.
Ask your financial institution for assistance.
The good folks there should be able to help you get the appropriate information.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (April 7, 2017) “Selling Jointly Owned Stock After the Death of a Spouse”