He Sold $400,000 of Stock at 78 to ‘Simplify Things for the Kids.’ Dying With It Would Have Erased the Entire Tax Bill

A 78-year-old widower holds $400,000 of stock he bought decades ago for $100,000, but selling now would trigger federal capital gains tax on a $300,000 gain. Holding until death would reset the cost basis to market value, and his children would inherit with little or no taxable gain.

Where a $400,000 Stock Account Ranks After 75

A brokerage account this size exceeds typical wealth for his age. The Federal Reserve’s 2022 Survey of Consumer Finances put median net worth for households 75 and older at nearly $335,000, with roughly 85% in home value. The Census Bureau’s separate estimate of median wealth for households headed by someone at least 75 was $307,900.

The median is the middle household, but most older households keep wealth in a house, so a taxable stock account worth more than the entire net worth is rare. The tax question below matters most for the minority of retirees who hold one.

What Selling at 78 Costs in Federal Tax

Long-term capital gains are taxed at 0%, 15%, or 20%, depending on taxable income. In 2026, single taxpayers pay 0% up to $49,450 and 15% up to $545,500. For married couples filing jointly, the 15% band runs up to $613,700.

Assume the widower has about $50,000 of other taxable income from Social Security, a pension, and IRA withdrawals. Nearly all of the gain is taxed at 15%, yielding roughly $45,000. A second tax also applies. The net investment income tax adds 3.8% once modified adjusted gross income passes $200,000 for single taxpayers. With the gain included, his income reaches about $350,000, which is $150,000 over that line.

The resulting surtax on that excess is $5,700. Total federal tax is about $50,700, before state income tax.

How the Step-Up in Basis Would Have Erased the Gain

For inherited property, the basis generally equals its market value on the decedent’s date of death or an alternate valuation date. If the shares are worth $400,000 when he dies, his children inherit them with a $400,000 basis, and if they sell soon after, they report little or no gain. The appreciation he built up over his lifetime is never taxed as income.

Estate tax does not apply at this wealth level. The federal estate tax exemption is $15 million per individual and $30 million for married couples as of 2026. A house and a $400,000 portfolio fall far below that threshold. Some states charge their own estate or inheritance taxes at lower levels.

Why Cashing Out Looks Tempting at Today’s Rates

Higher interest rates make selling more attractive. The 10-year Treasury yield reached 5% on September 28, 2026, up from 4% in February. At that yield, $400,000 would earn about $20,960 annually.

The capital gains bill alone equals more than two years of that interest. Paying the tax also leaves less principal to earn the yield, and retirees who want less stock risk have other options. One is rebalancing inside an IRA, where trades trigger no immediate tax. Another is selling only the share lots with the highest cost basis.

Ways to Simplify for Heirs Without Selling

Heirs can inherit an easier estate without a sale. Many brokerages offer transfer-on-death registration on taxable accounts, which passes shares directly to named beneficiaries outside probate while keeping the step-up. Moving several accounts to one firm cuts paperwork without selling anything. Suze Orman advises the audience to “check the beneficiaries on all your retirement accounts” and to talk with family members about how assets are set up. Most estate messes trace back to an outdated beneficiary form or an untitled account, which is why we put the full checklist in a free estate guide here.

Giving the shares away during life has a different tax result. Stock gifted while the owner is alive generally keeps the owner’s original basis. The children would take on his $100,000 basis and owe the capital gains tax themselves when they sell.

What the $50,700 Gap Means for Late-Life Stock Sales

For a retiree in his late 70s with highly appreciated shares, selling brings a large tax bill immediately. Holding until death postpones the gain, and the step-up then eliminates it for heirs. In this example, the difference is about $50,700 in federal tax. The comparison can change. The retiree may need cash for care or living costs, the position may be concentrated enough that a decline would threaten his security, or Congress may change the step-up rules. Without those factors, current law favors holding shares until death over selling at 78.

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