distribution of mutual fund assets after death

Shares of a mutual fund currently in a living revocable trust are to be distributed equally to me and my sister. We each already own shares of the mutual fund in our own names. If shares are transferred into our existing accounts, what happens to the cost basis of the transferred shares? Should we place the inherited shares in new accounts to keep them separate? I can't ask the trustee, because I am the trustee!

Reply to
sherry
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Do the shares get new ownership due to someone's death?

Then the answer depends quite a bit on which year the death occurs.

Reply to
Arthur Kamlet

The owner of the trust died in 2006; assets remained in place for the benefit of surviving spouse. Surviving spouse died in 2008, so assets now go to beneficiaries (my sister and me), so, yes, the assets will be in accounts under our separate names.

Reply to
sherry

Of course the trust wording is crucial, but assuming it is a typical living trust and you inherited the stocks on death of surviving spouse, the cost basis of the inherited shares should be value on date of death of surviving spouse.

Reply to
Arthur Kamlet

...regardless of whether you keep them in a separate account or not.

Phil Marti VITA/TCE Volunteer

Reply to
Phil Marti

There is not enough information to advise properly bginning with trust language dividing the original estate in respedt to community property or other ownership laws and preserving the maximum marital deduction when the first grantor died. So the vlue of the inherited shares may be either / or at DOD of the first to die, or DOD of the survivor, or both. They can go into existing accounts if you adequately preserve the identity of each group of shares and the mutual fund will acknowledge your identification of shares upon sale. Otherwise, when sold the mutual fund will value them at their average cost. How will the mutual fund, or you, know the value considering the above?

ed

Reply to
ed

It's up to you to keep track properly, not up to the fund.

Reply to
Arthur Kamlet

The bottom line is, open a separate account to make record keeping easier.

Reply to
PeterL

A typical living trust for a married couple divides the couple's property into two trusts when the first spouse dies. When the second spouse dies, property in the second spouse's trust takes on the basis of the date of death of the second spouse. The property in the trust of first spouse to die is not included in the estate of the second spouse, so the basis remains the value on the date of death of the first spouse to die.

Reply to
Stuart A. Bronstein

There's typical and then there's typical. My parents had no concern about estate tax, so their trust, which was just for probate avoidance, had them as co-trustees until the death of the first, then my brother and me as successor co-trustees upon the death of the second parent, with distribution of the trust's assets at that time. I'm told this is "typical" for couples without any exposure to estate tax.

I'm veering off topic from the original step-up issue, so feel free to stop reading, but I need to vent. My parents were in Kansas, as was a childhood friend who died this April and left me executor. His estate is going through probate, and already I much prefer the trust route in the role of the one cleaning up behind. With the trust it was a quick trip to the attorney to get a piece of paper regarding the trustees. Armed with that and a fistfull of certified death certificates, things were quickly taken care of. With the current estate it was first cool my heels for 6 weeks until I could get the necessary order from the court, then to work. Still to come is all the reports and receipts that the court will require. Of course, in my friend's case a trust wouldn't have helped much since he never would have gotten around to funding it. I was less than 24 hours into this when I had to head off to Vital Statistics to get a copy of his father's 1999 death certificate. His name is still all over the place!

Phil Marti

Reply to
Phil Marti

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