Are you bored with giving run-of-the-mill gifts? Perhaps a gold wine caddy or a monthly subscription to National Geographic is too mundane for you? Why not give stocks as gifts? Stocks are definitely way better than a pile of cold cash. Plus it’s a gift that will last long. And the process of transferring stocks is not as hard you probably thought it would be. And to top it all, it comes with some fringe benefits for you as well. They say it’s better to be on the giving end than to be on the receiving end — but do you know what’s better than that? Giving something and getting benefits from giving too.
Now, to answer the first question — Can tax be transferred to another person? Clearly, the answer is yes. In fact, gifting stocks is an interesting way of taking interest in the stock market or for any specific industry or firm. There are many ways to give stocks. Stock shares can be given through a brokerage firm from a current investment portfolio. Stock shares can also be given to your kids. It’s a great way to let them learn about investments and savings and handling money.
Do take note that when stock shares with capital gains are given as gifts, these capital gains will be transferred to the receiver. It’s always most sensible to seek advice from a tax professional regarding capital gains taxes for long-term holdings and short-term holdings. Usually, if the receiver of your stock share gift, decides to sell those stock shares, they need to pay taxes on capital gains including the purchase price and the selling price difference.
The most straightforward and easy way is to give stock shares to your kids as gifts are through a custodial brokerage account. Setting up one will allow you to give stock shares as well as other securities including mutual funds from your account to the custodial account. You may also buy particular securities straight up within the custodial account. When your child turns legal age, he will be allowed to be on the helm of the account.
Another option is giving a single share of stock. This will definitely ignite some interest in the financial markets for your child. You can buy a single stock from your broker that specializes in selling single share stocks. You can even tailor-fit the stock share to your child’s inclinations or leisure pursuits or interests. If your child is interested in gaming, give him or her a single share of Sony. This is such a fun and interesting way to teach your children to stock ownership. Start them young as they say. Do take note, however, that these companies might charge fees on top of framing and shipping costs for every single share purchase.
You’re probably wondering how to give stocks that are held in certificates? In this case, it is required for that stock to be transferred first in physical stock. The investor/giver must sign the stock endorsement in front of a broker or a bank as guarantor. There is also a form that needs to be completed relating to the transfer of ownership. After the procedure, the certificate becomes transferrable.
Now, if your stock is electronically held, you may begin the procedure of transfer by filling out a transfer request form. This can be done through a broker. Typically, your basic information is needed including the number of shares being transferred as well as the receiver’s personal and information. To make sure that the transaction is legal and binding, some companies need a verifiable signature with a Medallion Signature Guarantee. This is usually provided by the broker or the bank.
Now let’s say, you want to donate stocks to a charitable institution, here are the things to consider for doing so. Provided that the charity is established for it, a stock donation in lieu of cash donation is actually a good idea. If you want to give $2,000 USD to a charity of your choice but you need to get into your investment to raise funds for that, you might pay capital gains taxes on that, which will make your donation less. But if you give that amount in stocks, there is no need to pay capital gains tax and neither will the charity pay for the capital gains tax should it sell the stock in the future. Charities are entities that are exempted from taxes, so it’s good for both parties. You may also be able to get the “fair market value charitable deduction” on that donation. You can even opt to give this amount to the charity. Now, that’s awesome, don’t you think so?
Perhaps it’s safe to say that giving stocks as gifts has just leveled up the meaning of the adage, “It is more blessed to give than to receive.”