Can You Sell Stock Held in a Trust After Death in California? Rules and Process Explained

When someone passes away, their trust may include a wide range of assets, including publicly traded stocks, mutual funds, or private company shares. A common question that arises is: Can these stocks be sold by the trustee after the person’s death?

The answer is yes, but with important legal conditions. This article explains when and how a trustee can sell stock held in a trust after the death of the trust’s creator (the “settlor”), and what beneficiaries should know.

Trust Ownership Does Not End at Death

When a settlor passes away, their revocable living trust typically becomes irrevocable. However, the trust continues to exist as a legal entity, and the successor trustee takes over management.

If the trust holds stock or investment accounts, the successor trustee generally has the legal authority to:

• Transfer ownership of stock accounts into their name as trustee,

• Liquidate (sell) stock to pay debts or expenses, and

• Distribute proceeds or shares to beneficiaries according to the trust terms.

When Can a Trustee Sell Stock?

A trustee may sell stock after death if:

• The trust document grants that power, either explicitly or by default under the California Probate Code.

• The sale is in the best interest of the trust, such as to diversify risk, raise liquidity, or meet distribution requirements.

• The trustee is acting prudently and without conflict, in line with their fiduciary duty.

If the trust terms are silent or unclear, the trustee can usually still sell the stock under general fiduciary authority—unless the trust explicitly prohibits it.

What About Capital Gains?

Selling stock after death can have favorable tax consequences for the trust or its beneficiaries. Upon death:

• The cost basis of the stock is “stepped up” to the fair market value as of the date of death.

• If the stock is sold shortly after death, there may be little or no capital gain tax owed.

• If the trustee holds the stock and it appreciates further, future gains may be taxable.

A qualified tax or estate planning attorney can help evaluate the best timing for a sale based on tax efficiency.

What If the Stock Is in a Brokerage Account?

If the stock is held in a brokerage account titled in the name of the trust, the process is usually straightforward. The trustee will need to:

• Notify the financial institution of the death

• Provide a certification of trust

• Present a death certificate and possibly an affidavit of successor trustee

• Gain access to manage or sell the investments as needed

Private company shares or restricted stock may require additional steps such as valuation, approval from other shareholders, or compliance with buy-sell agreements.

Trustee Responsibilities When Selling Trust Stock

If you’re the trustee, California law imposes a fiduciary duty to:

• Act in the best interest of the beneficiaries

• Avoid unnecessary risk or delay

• Provide accountings showing gains, losses, and proceeds

• Distribute assets according to the terms of the trust

Failing to properly manage or sell stock can lead to legal disputes, tax issues, or surcharge actions.

Final Thoughts

Yes, stock in a trust can be sold after death—but only by the trustee, and only in accordance with the trust’s terms and California law. Selling stock may be necessary to pay debts, equalize distributions, or simplify administration, and in many cases it can be done with minimal tax impact.

Need Help Managing or Selling Trust Assets?

At Moravec, Varga & Mooney, we help successor trustees across California navigate the legal and financial complexities of trust administration. Whether you’re unsure about your authority, facing pushback from beneficiaries, or trying to sell stock in a trust, we’re here to help.

📞 Contact us today to schedule a consultation.

Contact the top-rated California trust and probate attorneys Moravec, Varga & Mooney today to schedule a telephonic consultation. Have questions? call (626) 460-1763 or email LV@MoravecsLaw.com.

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