The gift of cash is always a good way to show your appreciation, but giving someone stocks can be a powerful way to pass along wealth and introduce them to investing.
In this guide, you’ll learn the practical methods and key legal and tax implications for gifting stocks along with a clear picture of how to make it a thoughtful and strategic financial gift.
The Main Concept of Gifting Stocks
Gifting stocks involves transferring ownership of shares from one person to another. The process is straightforward, but it requires coordination between the giver and the recipient, often with their respective brokerage firms.
Instead of selling a stock and giving someone the cash, you’re transferring the asset itself. This can be a smart financial move, particularly if the stock has appreciated significantly in value since you bought it.
For example, imagine you bought 100 shares of a company five years ago for $50 per share. Today, that stock is worth $200 per share. If you sell the stock, you’ll have a capital gain of $150 per share that you’ll have to pay taxes on. By gifting the stock instead, you avoid the capital gains tax, and the recipient can hold the stock or sell it on their own timeline.
Methods for Gifting Stocks
There are several ways to give stocks as a gift, each with its own approach and considerations.
Broker-to-Broker Transfer
This is the most common and efficient method for gifting stocks between adults. You’ll need to contact your brokerage firm and initiate a transfer of shares to the recipient’s brokerage account. You’ll typically need basic information, such as the recipient’s name, address and account number. The transfer process is generally handled electronically via the Automated Customer Account Transfer Service.
Custodial Accounts
If you’re giving stocks to a minor, you’ll need to open a custodial account. Two popular choices are the Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA) accounts. As the giver, you serve as the custodian and manage the assets until the minor reaches the age of majority — typically 18 or 21, depending on the state. At that point, the minor gains full control of the assets. A benefit of this approach is that anyone can contribute to the account.
Stock Gift Apps
Some investing apps like Stockpile are designed to simplify the process of gifting stocks, often in fractional shares. Apps can make it easy to send through a digital gift card, even to someone who doesn’t have a brokerage account. They can then create an account on the app and receive it through there.
Paper Stock Certificates
Some companies still issue physical stock certificates. An old-fashioned, tangible gift like this can be a fun way to introduce someone to investing, especially for an event like a birthday or graduation. The process of transferring a paper certificate can be complex, however, often requiring a transfer agent, and it’s less common than electronic transfers.
Legal and Tax Implications
Before you gift a stock, it’s important to understand the tax rules. The two most important concepts to grasp are the annual gift tax exclusion and the cost basis.
- Annual gift tax exclusion: For 2025, you can gift up to $19,000 per person, per year without having to file a gift tax return. If you and your spouse are gifting together, you can give a combined $38,000 to a single recipient. If the value of the stock you’re gifting exceeds this amount, you’ll need to file IRS Form 709, but it won’t necessarily mean you owe taxes immediately. Instead, it will count against your lifetime gift and estate tax exemption, which is over $13 million for 2025.
- Cost basis: The cost basis is the original price of an asset and is used to determine capital gains or losses when it’s sold. When you gift stock, the recipient assumes your cost basis. For example, if you bought a stock at $20 and it’s now worth $50, the recipient’s cost basis is also $20. If the stock has lost value since you bought it, the rules are more complex, so it’s best to consult a tax professional.
A Gift that Grows
Gifting stocks is a meaningful and financially savvy way to support a loved one’s financial future. Whether you use a broker-to-broker transfer for an adult or a custodial account for a minor, the process is streamlined and generally efficient.
By understanding key concepts like the annual gift tax exclusion and cost basis, you can navigate legal and tax issues with confidence.
A gifted stock can be more than an asset. It’s an opportunity to teach a lesson about investing, compound growth and long-term financial planning, which can help set the recipient on a path toward financial literacy and success.
Frequently Asked Questions
Is it possible to gift fractional shares of a stock?
Yes, some investing apps and brokerage firms allow you to gift fractional shares, which are portions of a single share. This can make it easier to give a gift of a specific dollar amount, especially for high-priced stocks.
Does a gifted stock need to be declared on the recipient’s tax return?
The recipient doesn’t pay taxes when they receive the gift. If they later sell the stock, they will be responsible for paying capital gains tax on any profit, using your original cost basis.
What is the best way to gift stock to a minor?
The most common way to gift stock to a minor is by opening a custodial account, such as a UGMA or UTMA account. This allows you to manage the investments on their behalf until they reach the age of majority, at which point they gain full control.
