I'm specifically referring to financial assets like stocks, bonds, index funds, etc and to people who don't need to file an estate tax return; if they do need to file a return, they're certainly not going to ask me! My general advice to my friends is normally to sell such assets immediately because
- the proceeds from the sale represent a riskless profit,
- the tax implications are usually small because the basis of such assets is normally calculated from the date of the original owner's death (IRS publication 551), although I could see how this would become complicated
- if you wouldn't buy the assets at that price, don't hold on to them now,
- you'll get the highest present value for your sale immediately because of ongoing inflation, so unless you need part of the money as an emergency fund or other immediate purpose, invest it in an inflation-protected fund or an index fund in order to decrease the amount you lose to inflation
Is this good advice in general? I normally recommend people sell these inheritances immediately and invest them in a low cost index fund or something similar assuming they don't need to pay off debt or make a capital investment of some kind (buy/upgrade a house, etc.).
One exception I see is if you plan to invest the proceeds from the sale in the same mix of securities, then there probably isn't an advantage to sell. For example, if I inherit shares in VFINX, which I was planning to invest the proceeds in anyway, there doesn't seem to be an advantage to selling the inheritance and reinvesting it in the same asset. Of course, this isn't really an exception because you would "buy the asset at the current price."