How to give gift of stocks without breaking rules
Investment options for others have a few guidelines
Stocks are a popular investment: 46% of Americans owned a stock-related investment in 2023, compared to 43% in 2022, according to a recent Bankrate survey.
But stocks can also make great gifts, appreciating in value well beyond the initial gift amount. In many ways, it's the gift that keeps on giving.
Giving stock is not quite as easy as placing an order from Amazon, and would-be givers need to pay attention to a few rules so that they stay on the right side of the law.
Key takeaways
• Unlike conventional gifts, stocks have the potential for long-term growth. It can be a great way to build wealth.
• You can gift stocks to children through custodial accounts. For adults, you can transfer shares from an existing investment account to the recipient's brokerage account.
• You can gift up to $17,000 in calendar year 2023 ($18,000 in 2024) without triggering gift tax. If the stock appreciates in value, the recipient will owe capital gains tax when they sell
the stock. How to gift stock
If you're thinking of giving stock, there a few options for how to do so:
• Purchase stock specifically for a child: You can do that via a custodial account over which you have or another family member has control.
• Give stock from an existing investment account: Contact your broker to help make the transfer electronically or by stock certificate.
• Give stock with an app:
Find an online app that allows you to give stock.
In any case, the recipient should have a brokerage account to receive the stock. A minor child should have a custodial account, while an adult may have a regular account. While you could transfer the stock as physical certificates, it's merely a novelty to do so.
Either way, you'll want to stay under legal thresholds that could cause tax headaches.
You can safely gift stock under the annual gift exclusion, which allows individuals to give up to $17,000 annually (for 2023) or $18,000 (for 2024) to any number of recipients without incurring a gift tax. A married couple filing jointly can give up to double that individual amount annually. To qualify for this year's exclusion,
“Gifting stocks can be a great way to teach children or grandchildren about saving and investing, or a fun way of creating interest in the stock market.” — Eva Victor, senior director, Northwestern Mutual