Are you looking for a unique and potentially rewarding gift for a child? Buying stock as a gift is an excellent way to introduce them to the world of investing and financial literacy. At lawyergift.net, we understand the importance of thoughtful and impactful gifts, and gifting stock aligns perfectly with that philosophy. This guide will walk you through the process of how to give stock as a gift online, exploring different platforms, tax implications, and the overall benefits of this educational present. Consider this a fantastic way to foster an early interest in finance with investment apps, fractional shares, and custodial accounts.
1. Why Give Stock As A Gift?
1.1. Long-Term Growth Potential
Traditional gifts often lose their value over time, but stocks offer the potential for long-term growth. According to a recent Bankrate survey, 46% of Americans owned a stock-related investment in 2023, highlighting the increasing popularity of stock ownership. Gifting stock allows the recipient to benefit from potential market appreciation over many years.
1.2. Educational Opportunity
Giving stock is a smart way to introduce children to the world of investing, helping them develop financial literacy at an early age. By owning a piece of a company, kids can learn about how businesses operate, the importance of saving, and the power of long-term investment. Eva Victor, Senior Director High Net Worth Wealth Planning Attorney at Northwestern Mutual, notes that gifting stocks can be a fun way to create interest in the stock market, a company, or a particular industry.
1.3. Unique and Memorable Gift
In a world filled with toys and gadgets, gifting stock stands out as a unique and memorable present. It’s a gift that keeps on giving, not just in terms of potential financial returns but also in the knowledge and experience it provides. For anyone looking for unique gift ideas, especially for those with an interest in law or finance, lawyergift.net is the ideal starting point.
Alt: A child smiles while holding a framed stock certificate, representing the excitement of receiving stocks as a gift.
2. How To Buy Stock As A Gift For A Child Online: Step-By-Step
2.1. Open A Custodial Account
A custodial account, also known as a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account, is the most common way to give stock to a child. This account is managed by an adult (the custodian) on behalf of the child until they reach the age of majority (usually 18 or 21, depending on the state).
2.1.1. Choosing A Brokerage
Select a brokerage that offers custodial accounts and has a user-friendly online platform. Some popular options include:
- Fidelity: Known for its comprehensive research tools and no account fees.
- Charles Schwab: Offers a wide range of investment options and excellent customer service.
- TD Ameritrade: (Now part of Charles Schwab) Provides extensive educational resources and trading platforms.
2.1.2. Account Setup
- Application: Complete the online application, providing information about both the custodian (you) and the child.
- Funding: Fund the account through electronic transfers, checks, or other methods accepted by the brokerage.
- Investment Selection: Choose the stocks or ETFs you want to purchase as a gift.
2.2. Consider Stock Gift Apps
Several online apps specialize in gifting stock, making the process easy and accessible. These apps often allow you to purchase fractional shares, meaning you can give a portion of a stock even if you don’t have enough to buy a full share.
2.2.1. Stockpile
Stockpile allows you to give a gift card for a preset amount (ranging from $1 to $200) redeemable for stocks or ETFs. You can buy fractional shares, so you don’t need the money for a full share. Users should note that the app charges $4.95 per month for ongoing access. This is a straightforward way to introduce a child to investing without a large initial investment.
2.2.2. GiveAShare
GiveAShare.com allows you to buy single stock certificates as gifts. The company charges $39 in addition to the price of the stock, and the recipient will receive a framed certificate of the share. They become a real shareholder of the company, entitled to anything a shareholder gets, including annual reports and declared dividends, according to the company’s website.
2.3. Transferring Stock From An Existing Account
If you already own stock, you can transfer shares from your existing investment account to the recipient’s brokerage account. Contact your broker to arrange the transfer electronically or by stock certificate. Keep in mind that transferring physical stock certificates can be expensive and is generally considered a novelty.
2.4. Tax Implications
When gifting stock, it’s essential to understand the tax implications for both the giver and the receiver.
2.4.1. Gift Tax Exclusion
In the United States, you can gift up to $18,000 in 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. If you exceed this amount, you’ll need to report the gift to the IRS, but you likely won’t owe any gift tax due to the lifetime gift and estate tax exemption ($13.61 million in 2024).
2.4.2. Capital Gains Tax
When the child eventually sells the stock, they may owe capital gains tax on any profit made. The tax rate will depend on how long the stock was held (short-term vs. long-term) and the child’s income level. It’s advisable to consult with a tax professional to understand the specific implications based on your situation.
3. Choosing The Right Stock
3.1. Consider The Child’s Interests
When selecting a stock to gift, consider the child’s interests and hobbies. Choosing a company they are familiar with can make the gift more engaging and educational.
- Disney (DIS): A popular choice for kids who love movies, theme parks, and entertainment.
- Nike (NKE): Appeals to children interested in sports and athletic apparel.
- Starbucks (SBUX): A recognizable brand for those who enjoy coffee and treats.
- Coca-Cola (KO): A classic beverage company with a global presence.
3.2. Focus On Long-Term Growth Potential
While it’s important to choose a company the child will find interesting, also consider its long-term growth potential. Look for companies with strong financials, a solid business model, and a history of innovation.
3.3. Diversify With ETFs
Exchange-Traded Funds (ETFs) offer instant diversification by investing in a basket of stocks. This can be a less risky option than investing in a single stock, especially for beginners. Consider ETFs that track major market indexes like the S&P 500 or focus on specific sectors like technology or healthcare.
Alt: A child learns about stocks and investments using a tablet, highlighting the educational aspect of gifting stocks.
4. Benefits Of Gifting Stock
4.1. Fostering Financial Literacy
Gifting stock provides an opportunity to teach children about saving, investing, and the importance of financial planning. This knowledge can empower them to make informed financial decisions throughout their lives.
4.2. Long-Term Investment Growth
Unlike traditional gifts that may depreciate over time, stocks have the potential to grow in value, providing long-term financial benefits for the recipient.
4.3. Creating A Sense Of Ownership
Owning stock in a company can give a child a sense of ownership and connection to the business world. They may be more interested in following the company’s performance and learning about its products and services.
4.4. Tax Advantages
Gifting stock can offer tax advantages for both the giver and the receiver, especially when done strategically within the annual gift tax exclusion limits.
5. Tips For Gifting Stock
5.1. Stay Under The Gift Exclusion Limit
To avoid potential gift tax implications, ensure that the value of the stock gift stays under the annual gift exclusion limit ($18,000 in 2024).
5.2. Consider A Trust For Large Gifts
If you’re planning to give a substantial amount of stock, consider setting up a trust. A trust can help you control how the money is used and ensure that it’s managed responsibly. Consult with an estate planning attorney to determine if a trust is the right option for you.
5.3. Educate The Recipient
Take the time to explain the basics of investing to the child. Help them understand what it means to own stock, how the stock market works, and the importance of long-term investing.
5.4. Monitor The Investment Together
Regularly check in on the stock’s performance with the child. Discuss the company’s news, financial results, and any other relevant information. This can be a valuable learning experience and help them develop a deeper understanding of investing.
5.5. Personalize The Gift
Make the gift more meaningful by personalizing it. Include a handwritten note explaining why you chose that particular stock and what you hope the child will learn from the experience.
6. Donating Stock To Charity
While you’re in the gift-giving spirit, you may also consider giving stock to a charity and securing a tax write-off for the stock’s fair market value in the process. If you donate appreciated property, you’ll avoid the tax hit on the gains, take a tax deduction and help out someone, too.
“Applicable adjusted gross income limits are 30 percent of adjusted gross income for gifts of stock held for more than one year, with a five-year carryforward for any unused deduction,” says Victor.
Make sure your favorite charity qualifies for tax-deductible contributions and get any donations in by the end of the year to secure a write-off. If you’re not quite sure what you want to fund but want to take advantage of a tax write-off this year, look into donor-advised funds, which can allow you to take a large deduction this year but distribute the funds over a multi-year period.
7. Stock Gift Ideas For Different Occasions
7.1. Birthday
A birthday is a perfect occasion to gift stock. Choose a company that aligns with the child’s interests or hobbies. For example, if they love video games, consider gifting stock in a gaming company like Activision Blizzard or Electronic Arts.
7.2. Graduation
Graduation is a significant milestone that deserves a special gift. Gifting stock can help the graduate start their financial journey on the right foot. Consider gifting stock in a well-established company with long-term growth potential, such as Apple or Microsoft.
7.3. Holiday Gift
Stock can be a thoughtful and educational holiday gift. Choose a company that reflects the spirit of the season, such as Disney for Christmas or a renewable energy company for Earth Day.
7.4. Special Achievements
Recognize a child’s accomplishments, such as excelling in school or winning a competition, with a gift of stock. This can reinforce the value of hard work and inspire them to continue pursuing their goals.
8. Potential Challenges And How To Overcome Them
8.1. Market Volatility
The stock market can be volatile, and the value of the gift may fluctuate. This can be concerning for some recipients, especially those who are new to investing.
Solution: Emphasize the importance of long-term investing and explain that market fluctuations are normal. Encourage the child to focus on the company’s fundamentals rather than short-term price movements.
8.2. Tax Complexity
Understanding the tax implications of gifting stock can be confusing.
Solution: Consult with a tax professional to ensure that you’re following all the rules and regulations. Provide the recipient with resources and information to help them understand the tax implications when they eventually sell the stock.
8.3. Lack Of Interest
Some children may not be interested in investing or the stock market.
Solution: Make the gift more engaging by choosing a company they are passionate about. Explain how owning stock makes them a part-owner of the company and allows them to share in its success.
9. Legal And Ethical Considerations
9.1. Compliance With Regulations
Ensure that you comply with all applicable regulations when gifting stock, including gift tax rules and securities laws.
9.2. Transparency And Disclosure
Be transparent with the recipient about the risks and potential rewards of investing in the stock market. Disclose any potential conflicts of interest or biases you may have when choosing a particular stock.
9.3. Responsible Investing
Encourage responsible investing practices, such as diversification, long-term thinking, and avoiding excessive risk-taking.
10. Examples Of Companies Popular With Children
| Company | Stock Ticker | Description | Why It’s Appealing |
|---|---|---|---|
| Disney | DIS | Entertainment and media conglomerate | Popular characters, movies, and theme parks make it relatable and exciting for children. |
| Nike | NKE | Athletic apparel and footwear company | Appeals to children interested in sports and fashion; known for its innovative products and celebrity endorsements. |
| McDonald’s | MCD | Fast-food restaurant chain | Widely recognized brand with a familiar menu; offers a small connection to a tangible product. |
| Apple | AAPL | Technology company specializing in consumer electronics, software, and online services | Stylish and innovative products like iPhones and iPads are popular among children and teenagers. |
| Coca-Cola | KO | Beverage company | A classic and recognizable brand with a wide range of products; offers a sense of nostalgia and familiarity. |
| Netflix | NFLX | Streaming entertainment service | Offers a vast library of movies and TV shows that appeal to children and families; a popular and convenient entertainment option. |
| Hasbro | HAS | Toy and board game company | Creates popular toys and games that children love; offers a direct connection to their favorite playtime activities. |
| Microsoft | MSFT | Technology company specializing in software, hardware, and cloud computing | Provides software and services used in education and entertainment; a key player in the digital world. |
| Amazon | AMZN | Online retailer and technology company | Offers a vast selection of products and services; a convenient and popular shopping destination for families. |
| Alphabet (Google) | GOOGL | Technology company specializing in internet-related services and products | Provides search, email, and other services used by children and adults; a dominant player in the digital landscape. |
11. Common Mistakes To Avoid When Gifting Stock
11.1. Ignoring Tax Implications
Failing to consider the tax implications of gifting stock can lead to unexpected financial consequences.
Solution: Consult with a tax professional to understand the rules and regulations related to gifting stock.
11.2. Gifting Too Much
Gifting an amount that exceeds the annual gift tax exclusion limit can trigger gift tax implications.
Solution: Stay within the annual gift tax exclusion limit or consult with an estate planning attorney to explore other options, such as setting up a trust.
11.3. Not Educating The Recipient
Failing to educate the recipient about investing and the stock market can lead to a lack of interest or mismanagement of the gift.
Solution: Take the time to explain the basics of investing and encourage the recipient to learn more about the companies they own stock in.
11.4. Choosing The Wrong Stock
Selecting a stock without considering the recipient’s interests or the company’s long-term growth potential can result in a disappointing gift.
Solution: Involve the recipient in the stock selection process or choose a company that aligns with their passions and values.
11.5. Neglecting To Monitor The Investment
Failing to monitor the investment and provide ongoing guidance can lead to missed opportunities or poor decision-making.
Solution: Regularly check in on the stock’s performance with the recipient and offer support and advice as needed.
Alt: A stock certificate is presented alongside a calculator and pen, symbolizing the financial planning aspect of gifting stocks.
12. Staying Updated On Investment Trends
12.1. Following Financial News
Stay informed about the latest trends and developments in the stock market by following reputable financial news sources, such as The Wall Street Journal, Bloomberg, and CNBC.
12.2. Reading Investment Research
Review investment research reports from reputable firms to gain insights into specific companies and industries.
12.3. Attending Webinars And Seminars
Participate in webinars and seminars hosted by financial experts to learn about new investment strategies and opportunities.
12.4. Networking With Financial Professionals
Connect with financial advisors, brokers, and other professionals to exchange ideas and gain valuable insights into the world of investing.
13. Conclusion: A Gift That Keeps On Giving
Gifting stock to a child is a thoughtful and educational way to introduce them to the world of investing. By opening a custodial account, using stock gift apps, or transferring stock from an existing account, you can provide a unique and potentially rewarding gift that lasts a lifetime. Remember to consider the child’s interests, focus on long-term growth potential, and educate them about the importance of financial literacy.
At lawyergift.net, we understand the value of meaningful and impactful gifts. While our primary focus is on gifts for lawyers, we believe that gifting stock aligns with our commitment to providing unique and thoughtful presents that can make a lasting difference.
Ready to give the gift of stock? Explore our website for more inspiration and ideas for unique gifts that make a lasting impression. Contact us today at Address: 3210 Wisconsin Ave NW, Washington, DC 20016, United States or Phone: +1 (202) 624-2500 to learn more about our curated gift selections. Visit lawyergift.com to discover the perfect gift for any occasion.
14. FAQs About Gifting Stock To Children
14.1. What Is A Custodial Account?
A custodial account is a type of investment account that is managed by an adult (the custodian) on behalf of a minor (the child). The custodian has control over the assets in the account until the child reaches the age of majority, at which point ownership of the account transfers to the child.
14.2. How Do I Open A Custodial Account?
To open a custodial account, you will need to select a brokerage that offers custodial accounts and complete an application. You will need to provide information about both the custodian (you) and the child, as well as fund the account with cash or securities.
14.3. What Are The Tax Implications Of Gifting Stock?
In the United States, you can gift up to $18,000 in 2024 to any number of recipients without incurring a gift tax. If you exceed this amount, you’ll need to report the gift to the IRS. When the child eventually sells the stock, they may owe capital gains tax on any profit made.
14.4. Can I Give Stock Directly To A Child?
No, you cannot give stock directly to a child who is a minor. You will need to open a custodial account on their behalf.
14.5. What Happens To The Custodial Account When The Child Reaches The Age Of Majority?
When the child reaches the age of majority (usually 18 or 21, depending on the state), ownership of the custodial account transfers to them. They can then choose to continue managing the account themselves or transfer the assets to another account.
14.6. What Is A Stock Gift App?
A stock gift app is an online platform that allows you to easily purchase and gift stock to others. These apps often allow you to purchase fractional shares, making it possible to give small amounts of stock even if you don’t have enough to buy a full share.
14.7. How Do I Choose The Right Stock To Gift?
When selecting a stock to gift, consider the child’s interests and hobbies. Choose a company they are familiar with and that has long-term growth potential.
14.8. What Are Some Popular Stocks To Gift To Children?
Some popular stocks to gift to children include Disney, Nike, Apple, and McDonald’s. These companies are well-known brands with products and services that appeal to kids.
14.9. Can I Donate Stock To Charity In My Child’s Name?
Yes, you can donate stock to charity in your child’s name through the custodial account. This can be a great way to teach them about philanthropy and the importance of giving back to the community.
14.10. What Are The Benefits Of Gifting Stock To Children?
Gifting stock can help children develop financial literacy, learn about investing, and build long-term wealth. It can also create a sense of ownership and connection to the business world.
