Stocks can be given to a recipient as a gift whereby the recipient benefits from any gains in the stock's price. Giving the gift of a stock can also provide benefits for the giver, particularly if the stock has appreciated in value since the giver can avoid paying taxes on those earnings or gains. Although there are multiple ways of gifting stock, the process depends on how it's currently being held.
- Stocks can be given to a recipient as a gift whereby the recipient benefits from any gains in the stock's price.
- Gifting stock from an existing brokerage account involves an electronic transfer of the shares to the recipients' brokerage account.
- Investors can also buy a single share of a stock from their broker or from companies that specialize in selling single shares.
Understanding How to Gift Stocks
Gifting shares of stock can be a fun way of creating interest in the stock market, a company, or a particular industry. Stock shares can be gifted to recipients from an existing investment portfolio through a brokerage firm. Stock shares can also be gifted to children as a single share to teach them about money, investing, and saving.
Please bear in mind that gifted shares with a capital gain will be transferred with the gain to the recipient. As a result, if the recipient sells those shares, they will have to pay taxes on the capital gains, which would include the difference between the original cost basis or the purchase price and the selling price. Please consult a tax professional since capital gains taxes can be different for short-term holdings versus long-term holdings.
Transferring a Stock Certificate
If the stock is being held in certificate form, transferring the physical stock will be required. The owner must endorse the stock by signing it in the presence of a guarantor, which can be their bank or broker. There may also be a form on the back of the certificate, which relates to the transferring of ownership. After the certificate is complete, it will be rendered non-negotiable and becomes transferable.
Gifting Stock Through a Broker
Typically, there won't be a physical copy of the stock; instead, the shares would be held as an electronic version stored in a brokerage account. The sender or the person gifting the stock can transfer ownership of all, or a portion, of their stock holdings for a particular company. Many brokers also offer the ability to transfer shares as a gift periodically. For example, the sender could establish an agreement with the broker to gift or transfer shares to a child every year on the child's birthday.
Most brokerage accounts require a written and signed authorization from the sender with explicit instructions as to how the transfer should be done. Typically, a broker will have an online form that can be completed, which can include the following information:
- Account name and address
- Account number
- Stock description including the number of shares and the company name
- Account name
- Social Security number
- Account number
If the shares are to be transferred within the current brokerage firm, it should be fairly straightforward. However, if the transfer is being sent to another financial institution, the sender should contact the receiving institution for the firm's procedures on completing a stock ownership transfer. The receiving institution will likely have an address for which the written authorization is to be sent or electronic transfer instructions since the shares can be transferred electronically from the sending broker.
Also, the sender will need to be sure there's an account established with the receiving broker before completing the transfer.
Gifting a Single Share
There is also the option to gift a single share of stock, which can be a way of creating interest in the financial markets for a child. Investors can buy a single stock from their broker or from companies that specialize in selling single shares.
Websites such as GiveAShare specifically sell shares of stock to gift to people. Gifting a share to a child or a teen can be tailored to their interests or hobbies. For example, a single share of Nintendo or Sony could be gifted to a young person interested in gaming. For younger children, gifting a single share of Disney can be a fun way to introduce them to stock ownership.
With any single share purchase, please be aware that the company might also charge a fee as well as costs for framing and shipping.