Your stocks transfer to whoever you name in your will or trust, or to your heirs under state law if you have neither

When you die, your stocks do not disappear. They become part of your estate — everything you own — and pass to the people you designate or, if you leave no instructions, to whoever state law says inherits. The exact path depends on how you own the stocks and what paperwork you have in place.

If you own stocks in your individual name with no beneficiary named, they go through probate. That means a court oversees the transfer, which takes months and costs money in fees. If you name a beneficiary on the brokerage account itself, or if you own the stocks through a trust, they skip probate and move directly to that person. The stocks themselves keep their value — they do not vanish — but the person who receives them becomes responsible for any taxes owed on gains.

Key Takeaways

  • Stocks held in your individual name pass through probate unless you name a beneficiary directly on the brokerage account or own them through a trust.
  • Naming a beneficiary on your brokerage account is free and takes minutes, and it bypasses probate entirely.
  • The person who inherits your stocks receives a "stepped-up basis," meaning their cost basis resets to the stock price on the day you died, which can reduce their capital gains tax.
  • If you own stocks jointly with someone else with rights of survivorship, those stocks pass to the surviving joint owner automatically and outside probate.

How stocks transfer depends on how you own them

The method of ownership matters more than the stocks themselves. If you own stocks in your name alone at a brokerage like Fidelity, Charles Schwab, or Vanguard, they become part of your probate estate when you die. The executor of your will — the person you name to handle your affairs — must go to court, prove the will is valid, and get permission to transfer the stocks to whoever you named as heir.

If you own stocks jointly with another person and the account is set up as "joint tenants with rights of survivorship," the stocks pass directly to the surviving joint owner. No court is involved. This is common between spouses or between a parent and adult child. The surviving owner simply notifies the brokerage with a death certificate, and the stocks move into their name.

If you own stocks through a revocable living trust, they pass to whoever you named as successor trustee or beneficiary. The trustee handles the transfer outside of court. This method avoids probate and keeps the transfer private — probate records are public, but trust transfers are not.

Naming a beneficiary on your brokerage account

Most brokerages allow you to name a beneficiary directly on the account. This is called a "transfer on death" or TOD designation. When you die, the stocks go straight to that person without probate. You can usually do this online or by calling your brokerage and asking for the beneficiary form.

You can name one person or split the account among multiple people — for example, 50 percent to your child and 50 percent to your grandchild. You can change the beneficiary at any time while you are alive. The beneficiary has no rights to the account while you are living; they only receive the stocks after you die and provide a death certificate.

This method is free and takes no legal paperwork. If you have not named a beneficiary and you die, the brokerage will require your executor to go through probate to transfer the stocks, which can take six months to two years depending on your state and the complexity of your estate.

The stepped-up basis and taxes for the person who inherits

When someone inherits your stocks, they receive what is called a "stepped-up basis." This means the cost basis — the price used to calculate capital gains tax — resets to the stock price on the day you died, not the price you paid when you bought it.

Example: You bought 100 shares of a stock for $10 per share in 2010. When you die in 2024, the stock is worth $80 per share. Your heir inherits the stock with a basis of $80 per share. If they sell it immediately for $80, they owe no capital gains tax. If you had sold it before you died, you would have owed tax on the $70-per-share gain.

This is a significant tax advantage and one reason people sometimes hold appreciated stocks rather than selling them. The heir still owes income tax on any gains that happen after they inherit — only the gain up to your death date is erased from a tax standpoint.

What happens if you die without a will or trust

If you die without a will or trust, your state's intestacy laws decide who gets your stocks. Usually this means your spouse gets some or all of it, and your children split the rest. The exact split varies by state. Your stocks still go through probate, and the court appoints an administrator to oversee the transfer.

This process is slower and more expensive than having a will or trust in place. Court fees, attorney fees, and executor fees can reduce the value of your estate by 3 to 7 percent depending on your state and the size of your estate. Naming a beneficiary directly on the account or creating a trust avoids these costs.

If you have no spouse, children, or other close relatives, your stocks may go to the state under "escheat" laws. This is rare but can happen if no one comes forward to claim the estate within a set time period, usually several years.

Joint ownership and what it means for your stocks

If you own stocks jointly with another person, the way the account is titled determines what happens when you die. "Joint tenants with rights of survivorship" means the surviving joint owner gets the stocks automatically. "Tenants in common" means your share goes through probate and passes to your heirs, not to the other joint owner.

Most joint brokerage accounts are set up as joint tenants with rights of survivorship. This is common between spouses. When one spouse dies, the surviving spouse simply provides a death certificate to the brokerage, and the account becomes theirs alone. No probate is needed.

If you own stocks jointly with someone who is not your spouse, be aware that the surviving joint owner gets the entire account, not just their share. If you intended for your child to inherit half and your sibling to inherit half, joint ownership will not achieve that — your sibling gets everything. A will or trust is clearer for splitting assets among multiple people.

Inherited stocks and what the new owner can do

Once someone inherits your stocks, they own them outright. They can hold them, sell them, transfer them to another brokerage, or give them away. They are responsible for any taxes owed on gains that happen after they inherit.

If they sell the inherited stocks within a short time, they usually owe little or no capital gains tax because of the stepped-up basis. If they hold the stocks for years and the price rises, they will owe capital gains tax on the increase from the date they inherited them.

Some heirs choose to sell inherited stocks quickly to raise cash or to rebalance their portfolio. Others hold them as long-term investments. There is no requirement to keep inherited stocks — the new owner can do whatever they want with them.

Frequently Asked Questions

Do I need a lawyer to set up a beneficiary on my brokerage account?

No. You can name a beneficiary yourself by contacting your brokerage or filling out a form online. It is free and takes minutes. A lawyer is not needed unless you want to create a trust or have a complex estate with multiple assets and heirs.

What if I name a beneficiary but also have a will that says something different?

The beneficiary designation on the brokerage account overrides the will. The stocks go to the person named on the account, not to whoever the will says should get them. This is why it is important to keep your beneficiary designations updated if your wishes change.

Can my heirs sell my stocks right away or do they have to wait?

They can sell immediately. Once they inherit the stocks and provide a death certificate to the brokerage, they own them and can do whatever they want. There is no waiting period or lock-in.

What if my stocks are in a 401k or IRA instead of a regular brokerage account?

Retirement accounts have their own beneficiary rules and pass outside of probate if you name a beneficiary. The person who inherits a 401k or traditional IRA usually has to take distributions over time and pay income tax on them, which is different from inheriting stocks in a regular account.

Do I owe taxes on stocks I inherit?

You do not owe federal income tax on the inheritance itself. You only owe capital gains tax if you sell the stocks for more than they were worth when you inherited them. The stepped-up basis means you usually owe little or no tax if you sell soon after inheriting.