A family member recently passed away and left me about ~$150,000 in stocks. The stocks are primarily dividend focused with some blue-chips that they’ve held for many years. My current portfolio is about $5,000 with mostly tech stocks and I do a minimal amount of trading.

My questions:

-How do I go about managing this new portfolio once I receive it?

-Should I be looking to close out of these positions or leave them and reinvest the dividends / add the dividends to my savings?

-Are there any taxes I should be aware of or plan for?

For background, I have a low six figure salary but live in a high COL area, so my savings is minimal outside of my 401k and ROTH IRA contributions. Having some cash in hand for an emergency fund would go a long way.

Appreciate any advice Reddit may have.

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Stock-Freedom t1_jacvunz wrote on February 28, 2023 at 3:09 PM

I’d move it all to broad market funds and then slowly use it as savings to fill your retirement accounts.

Follow the flowchart.

My generic advice:

https://i.imgur.com/lSoUQr2.png

Here is the flowchart from the r/personalfinance subreddit’s Prime Directive. If you follow that, you will be ahead of almost all of your peers.

Stop by the sidebar to see the Common Topics, which include basic money handling and investing.

You don’t need to talk to anyone or buy some random book to do this. You have all the tools right here.

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hurryupweredreamin OP t1_jad8w8w wrote on February 28, 2023 at 4:35 PM

Are there specific broad market funds I should be looking at?

Stock-Freedom t1_jadbwdm wrote on February 28, 2023 at 4:54 PM

Cheap expense ratio S&P or world market ones. Whatever your brokerage offers.

hurryupweredreamin OP t1_jadf4uw wrote on February 28, 2023 at 5:15 PM

Thank you

sonnyfab t1_jacvwh7 wrote on February 28, 2023 at 3:09 PM

I'd cash them out and buy broadly diversified, low fee, tax efficient index funds. If you're not currently maxing your retirement, I would increase your contributions to the maximum and supplement your income using these funds.

MountainMantologist t1_jacz0zh wrote on February 28, 2023 at 3:30 PM

>-Are there any taxes I should be aware of or plan for?

I'm not a lawyer or CPA but your cost basis in the stocks should be set on the day your family member passed away. So just look up the stock price of your different holdings on that day and that'll tell you whether you have any appreciation on which to pay taxes when you sell.

avalpert t1_jadok7e wrote on February 28, 2023 at 6:14 PM

>So just look up the stock price of your different holdings on that day

For publicly traded stock, you actually use the average of the high and low for the day of death - not the open/close or randomly chosen price that day.

Fish-Weekly t1_jad90zd wrote on February 28, 2023 at 4:36 PM

Yes, this is key - you get a “stepped up basis” which will greatly reduce any capital gains taxes if you want to sell and invest in something else.

Levertki1 t1_jad3eac wrote on February 28, 2023 at 3:59 PM

If they are good, I would let them ride. Increase 401k contributions and use dividends to back fill your checking for take home decrease.

avalpert t1_jadoahr wrote on February 28, 2023 at 6:12 PM

You should be looking sell all the position now and rebalance into your current desired portfolio allocation.

You may have some capital gains tax implications but they will be much reduced due to the stepped-up basis on death.

ct-yankee t1_jaegnfi wrote on February 28, 2023 at 9:12 PM

Jumping in on the bandwagon to max your 401k if you already arent and supplement the differential with these stocks, using the dividends and sale of the stock as needed to replace your income that you are now diverting to your 401k max.