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  • Writer's pictureStephen H Akin

Giving the gift of stock

Recently I was asked about some of the advantages of getting families more involved in developing good wealth building habits.

One very interesting way to get students involved in investing is to give them a gift of stock. It makes a great item to put under the Christmas tree, particularly if framed, matted and done up nicely.

From that point you can get them to follow financial markets and how their stock reacts to different events as life unfolds.

There is another great advantage and that is by becomeing a shareholder you will gain access to the company’s dividend reinvestment program. That will also allow them to buy more shares with no commission.

Here's how you might consider gifting stocks this year.

Through a custodial account for your kids or grandkids.

One of the simplest ways to get your kids started in stocks is to set up a custodial brokerage account. You’ll be able to transfer existing shares of stock, mutual funds or other securities from your account to the custodial account, or buy specific securities directly within the custodial account. The child will take control of the account when they hit a certain age — typically 18 or 21, depending on the state.

As a virtual stocking stuffer for friends and family

All that’s required to transfer shares to an adult friend or family member is for the receiver to have a brokerage account. There are a few logistical hurdles — you’ll need their account information and a few more personal details to actually perform the transfer — but if a promissory message in a Christmas card is sufficiently exciting, gift away. If they don’t have an account, you could help open and fund one for them as part of the gift.

You can start the process online in your own brokerage account by opting to gift shares or securities you own; if you can’t find that option, contact your brokerage firm directly. If you want to gift a stock you don’t already own, you’ll have to purchase it in your account, then transfer it to the recipient.

To give to charity the wise way

As long as the charity is set up for it, donating stock instead of cash can be a smart way to do good this holiday season. For example, if you want to donate $1,000 to a charity but have to dip into your portfolio to raise the cash, you might pay capital gains taxes on that sale, netting you less than $1,000 to donate. But if you gave $1,000 in stock instead, there’s no tax consequence for you because you’re not realizing any of the gains, and the charity won’t pay taxes when it sells the stock since it's a tax-exempt entity. What’s more, you may be able to claim a fair market value charitable deduction on that donation. Want to pass these savings back to the charity? All the merrier.

As an early step toward passing down wealth

If you’re thinking about your legacy, gifting stocks can be a valuable tool, as opposed to liquidating and paying capital gains taxes. The IRS allows you to gift up to $15,000 per year, per person — including stock. This $15,000 limit isn't bound by familial or marital ties. So technically, you could give $15,000 in stock to all of your children, grandchildren, in-laws, friends and neighbors each year.


Need help? I'll be happy to guide you. Remember Akin Investments is a fiduciary advisor. We sell no insurance or financial products.

Your success is our only interest!

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