Mutual Funds Cost Basis

[SavingBucks]

My mother passed away a few months ago, and my brother is TOD for one of her mutual funds. I am trying to assist since I am the executor of her trust. I spoke to the mutual fund company and a copy of the death certificate, letter of instruction, and new application for my brother is required in order to transfer shares to his name. It is my understanding that the value of the shares is via a stepped up basis -- ie., the value on her date of death. On the company application, there is a section titled : COST BASIS SELECTION. The choices are Average Cost (default method, if not specified), First-In, First-Out (FIFO) ; Last-In, First Out (LIFO); Highest-Cost, First-Out (HIFO); or Specific Share Identification. Since he will be using the value of the shares on the date of her death as his basis -- is a method other than Average Cost better in this case? Any feedback would be helpful.

Thank you in advance.

[kork13]

Actually this doesn't matter. Cost basis selection only applies when you sell shares, and can be changed almost anytime, for any reason, as often as desired. It basically drives which shares will be sold when your brother sells the shares. FIFO sells the oldest shares first (normally maximizes gains & likely as LTCG), LIFO sells the newest shares first (may minimize gains, prioritizes STCG..... seems dumb), HIFO sells the highest-basis shares (minimizes taxable gains, though could pull both STCG & LTCG), and SpecID let's you select the specific shares you want to sell. Average actually makes the least sense to me, and I'm not sure exactly how that functions from a per-share perspective. Maybe it simply sells shares at the average basis, then adjusts the basis of all the remaining shares to account for the sale? I dunno. I prefer SpecID because I'm a bit of a control freak.