Managing Investment and Brokerage Accounts After a Death

Investment and brokerage accounts — stocks, bonds, mutual funds, ETFs held at brokerages like Fidelity, Schwab, or Vanguard — are often among the larger assets in an estate. How they're handled depends on how the accounts were set up. This guide explains the key paths and what beneficiaries and executors need to do.

The Three Scenarios

The process for investment accounts after a death falls into three categories based on account structure:

1. Accounts with named beneficiaries (Transfer on Death)

Many brokerage accounts have a Transfer on Death (TOD) designation — a named beneficiary who receives the assets directly upon the account holder's death, bypassing probate. This is the fastest and simplest path.

What the beneficiary does:

1. Contact the brokerage directly (Fidelity, Schwab, Vanguard, etc.)
2. Provide the death certificate and your identification
3. Complete the brokerage's beneficiary claim form
4. Decide whether to transfer assets in-kind (transfer the investments as-is to a new account in your name) or liquidate and receive cash

In-kind transfers are generally advisable because selling creates a taxable event. You can always sell later. The brokerage's bereavement team will guide you through their specific process. Most complete the transfer within 2–3 weeks of receiving documentation.

2. Joint accounts (Joint Tenancy with Right of Survivorship)

Joint brokerage accounts held with right of survivorship pass automatically to the surviving joint holder. Visit or call the brokerage, provide the death certificate, and ask to update the account to sole ownership. The assets remain in the account and the surviving holder continues managing them.

3. Sole accounts without beneficiary

These accounts become estate assets and require the executor to manage them through probate. The executor needs:

• Letters testamentary from the probate court
• Death certificate

The executor can open an estate brokerage account and transfer the investments, or liquidate them and move the proceeds to the estate bank account. The brokerage's institutional services or estate department handles this.

Inherited IRA and 401(k): A Special Case

Retirement accounts (IRAs, 401(k)s, 403(b)s) have their own rules for inherited accounts that differ from regular taxable brokerage accounts. The key rules under the SECURE Act 2.0:

• Surviving spouse: Can roll over the inherited IRA into their own IRA (most flexible option) or treat it as an inherited IRA (different required minimum distribution rules). Spousal rollover is generally the best choice if the spouse doesn't need the money immediately.
• Other eligible designated beneficiaries (minor children of the deceased, disabled or chronically ill individuals, and individuals not more than 10 years younger than the deceased): Have more favorable options, including stretching distributions over their lifetime.
• All other beneficiaries (most heirs): Must withdraw all funds from an inherited IRA within 10 years of the original account holder's death (the "10-year rule"). Annual withdrawals are not required within that window, but all funds must be out by end of year 10.

Inherited IRA withdrawals are generally taxed as ordinary income in the year received. Poor planning of withdrawals from inherited IRAs can result in a significant, avoidable tax burden. Consult a tax advisor before making distributions from inherited retirement accounts.

Cost Basis ("Step-Up")

For taxable brokerage accounts (not IRAs), inherited assets receive a "stepped-up cost basis" — the cost basis is reset to the fair market value on the date of death (or an alternate valuation date). This is one of the most significant tax benefits of inheritance: it wipes out any capital gains that accrued during the deceased's lifetime.

Example: The deceased bought 100 shares of ABC at $10/share (cost basis: $1,000). The shares are worth $50/share at death (FMV: $5,000). The heir inherits them with a cost basis of $5,000. If the heir sells at $52/share, the taxable gain is only $200, not $4,200.

For more on tax treatment of inherited assets, see our article on the taxes after a death guide.

If You Can't Find All Accounts

Deceased people sometimes have investment accounts that beneficiaries don't know about. To find them:

• Review tax returns for dividends, interest, and capital gains income — these will list the payer (brokerage)
• Check for 1099 forms in their files
• Search state unclaimed property databases — dormant accounts may have been escheated to the state
• Check for old paper statements in their files

For the complete accounts management overview, see our managing accounts guide. For the broader picture of assets after a death, see our property and assets guide.