How To Buy Stock As A Gift __EXCLUSIVE__
Stock can be the gift that keeps on giving, appreciating in value well beyond the initial gift amount. And it can still be quite valuable long after a typical birthday or Christmas gift has been thrown out or spent.
how to buy stock as a gift
Giving a share of stock is a good way to help a kid get on solid financial footing, but the lessons that come with it are even more important. When you give a special child a share of stock, consider giving them tools for financial literacy too.
I would like to gift a portion of my stock to my daughter. Do I have to sell it first or can I simply gift the actual shares in the amount allowed this year? Also, I want her to hold onto it until she retires or has a real need for the money. Is that possible?
This is an excellent and somewhat complicated question because it deals with several issues: capital gains taxes, gift tax rules and financial control. While I can't go into a lot of detail here, I can give you some general guidelines. At the same time, I recommend that you talk to your financial advisor, tax professional and perhaps even your estate planning attorney about the particulars of your situation before making your gift.
First, the simplest part of my answer is that you don't have to sell stock to make a gift; you can transfer it directly from one brokerage account to another. You don't mention your daughter's age, but even if she were a minor, you could open a custodial account for her and make the stock transfer.
Keep in mind, however, that this gift would be irrevocable. If she's a minor, she'll have full control over the assets at the termination age (which can differ by state, but usually between 18-21). If she's older and already has a brokerage account, check with your own financial institution on the process for making the transfer to her account.
Next, you have to consider capital gains taxes. Your decision whether to sell the stock and give your daughter the proceeds or transfer the shares to her isn't just about process. An important consideration is how you'd each be impacted by possible capital gains taxes:
Another choice is to hold off and bequeath the stock to your daughter in your will (which would have the added benefit of leaving you in control of the money until that time). In that case, the recipient's cost basis is the fair market value at the date of death, which could lower your daughter's tax liability. It's also important to note that inherited stock, regardless of when it was first obtained by the deceased, is always treated as "long-term" property.
A married couple who is "sharing" gifts can give up to $32,000 without having it count against their lifetime exemption, but they do have to report the gift. This applies to cash or stock. If the fair market value of the stock you give your daughter is $16,000 or less at the time you give it to her, there's likely no filing required.
If you give her more than $16,000 in a single year, you'll need to report the gift, and it would apply to your lifetime exemption. However, with the current $12.06 million lifetime exemption per person, it's only the extremely wealthy who have to be concerned about actually paying a gift tax.
I can certainly understand your desire for your daughter to hang on to the stock until she has a specific financial need. However, if you give it to her as a gift, it's hers to use as she pleases. While you can express your wishes to her, the only way to assure control would be to set up a trust that provides guidance on distributions. It's a good idea to consult with an attorney since there are several steps to set up a trust as well as many considerations to make sure that it properly reflects your wishes.
To me, the best thing to do would be to have a frank conversation with your daughter about your plan and your wishes, then talk to your financial, tax and estate planning professionals. In fact, if you're comfortable with the idea, why not set up a meeting with your financial advisor and your daughter so that the three of you can discuss the best way to proceed. It could be a great opportunity to enhance your daughter's awareness of the importance of smart money management as well as a way to reassure yourself that your gift will be most effective.
Depending on the size of the gift, you may also need to report it to the IRS. In 2020, you can give up to $15,000 to anyone as a gift and not have to report it. Any more than that and it applies to your lifetime exemption.
Generally, those who buy stock as a gift for charity incur more generous tax exemptions when their donation is larger. However, any size gift can help to offset your own capital gains taxes. To score tax exemptions for gifted stocks to charity, follow these rules:
For some people, getting shares of stock as a gift could be the one thing they need to get ahead. It could be the launch of a retirement savings, the first step toward saving for property or just a way for someone to learn about the stock market, no strings attached. You can maintain some control, or you can let the gift receiver take the reins.
And, essentially, what I love about this site is that they allow you to start investing like they say just for $5. What is great about that is they allow you to buy fractional shares of stocks, and there are actually very few companies who actually will allow you to do this.
If you hold your stock through a bank or broker as a beneficial shareholder, your dividend will be deposited directly into your account. If you have any questions, please contact your broker directly.
Unless the recipient plans to put the cash you gift them into a high-yield savings account or an investment account, the cash you gift them will remain stagnant; it won't grow on its own. If you gift stock, there is the chance that, in the long run, the value will grow, giving the recipient an incentive to hold on to the stock for a while before cashing out."}},"@type": "Question","name": "How do I gift a stock without paying taxes?","acceptedAnswer": "@type": "Answer","text": "As long as the amount of stock you gift is under the gift tax exclusion that applies to your situation, you should not have to pay taxes on gifted stock. You also have to consider the tax implications for the recipient. When you give the gift of stock, the recipient has to pay taxes on any capital gains they earn when they sell the shares."]}]}] .cls-1fill:#999.cls-6fill:#6d6e71 Skip to contentThe BalanceSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.BudgetingBudgeting Budgeting Calculator Financial Planning Managing Your Debt Best Budgeting Apps View All InvestingInvesting Find an Advisor Stocks Retirement Planning Cryptocurrency Best Online Stock Brokers Best Investment Apps View All MortgagesMortgages Homeowner Guide First-Time Homebuyers Home Financing Managing Your Loan Mortgage Refinancing Using Your Home Equity Today's Mortgage Rates View All EconomicsEconomics US Economy Economic Terms Unemployment Fiscal Policy Monetary Policy View All BankingBanking Banking Basics Compound Interest Calculator Best Savings Account Interest Rates Best CD Rates Best Banks for Checking Accounts Best Personal Loans Best Auto Loan Rates View All Small BusinessSmall Business Entrepreneurship Business Banking Business Financing Business Taxes Business Tools Becoming an Owner Operations & Success View All Career PlanningCareer Planning Finding a Job Getting a Raise Work Benefits Top Jobs Cover Letters Resumes View All MoreMore Credit Cards Insurance Taxes Credit Reports & Scores Loans Personal Stories About UsAbout Us The Balance Financial Review Board Diversity & Inclusion Pledge View All Follow Us
Budgeting Budgeting Calculator Financial Planning Managing Your Debt Best Budgeting Apps Investing Find an Advisor Stocks Retirement Planning Cryptocurrency Best Online Stock Brokers Best Investment Apps Mortgages Homeowner Guide First-Time Homebuyers Home Financing Managing Your Loan Mortgage Refinancing Using Your Home Equity Today's Mortgage Rates Economics US Economy Economic Terms Unemployment Fiscal Policy Monetary Policy Banking Banking Basics Compound Interest Calculator Best Savings Account Interest Rates Best CD Rates Best Banks for Checking Accounts Best Personal Loans Best Auto Loan Rates Small Business Entrepreneurship Business Banking Business Financing Business Taxes Business Tools Becoming an Owner Operations & Success Career Planning Finding a Job Getting a Raise Work Benefits Top Jobs Cover Letters Resumes More Credit Cards Insurance Taxes Credit Reports & Scores Loans Financial Terms Dictionary About Us The Balance Financial Review Board Diversity & Inclusion Pledge InvestingAssets & MarketsStocksHow To Gift StockGifting Stock Explained
Giving stock to a child may be a difficult, but rewarding thing to do. Many children likely prefer to receive something physical, like a new toy or electronics. However, giving shares of stock may be a good way to introduce them to the concept of investing or to give a more meaningful financial gift than simply cash.
Even one single share of a big-name company can be expensive to buy. For budget-friendly gifts, you may consider buying fractional shares or shares of exchange-traded funds (ETFs) from a broker that allows such transactions. 041b061a72