Expert: Doug Ingram - 9/26/2010

Question
Hi Doug,
I am inheriting some securities and bonds. I am being asked by the person handling the  estate if I want to cash out some of these investments before they are transferred to me. I do plan on cashing out some. Is there an advantage to cashing out before they are transferred since they are coming from a trust? They are telling me that I'm better off taking the cash because the commission rate on the bonds are high. Won't I be "paying" the commission either way?

Thank you,
Bill  

Answer
Sorry so late - I was out of town.

If the bonds are allowed to mature, and you don't have to redeem them early, they will mature at cash value with no commission.

This is assuming there is no credit risk where the bonds might default.

Bonds don't have commissions typically (like stocks do) unless they are traded in a way that all fees are disclosed.  Usually, there is a bid and the broker will add his fee - and you see the actual funds that he quotes you.  

If you are told your bond will be sold at 101 or 103 or 98 - whatever, you can always get another bid from another broker just to make sure the bids are on market.

If they are small lots of $5,000 face (or 10K 15K etc.), the ticket charges will affect the price and the bid is going to be less just to absorb the fees.

You also have accouting and estate issues you may need help with.  Bonds have done well, so the bids should be good.  It won't hurt to get a confirming bid.  

You can always just collect the interest payments and let the bonds mature.  If they've been around a while, and have no credit issues, the coupons are most likely much higher than current offerings.