Money has always been regarded as the classic “I didn’t know what to get you” gift. But sometimes a pile of Benjamins just feels a little crass. Gift cards can feel a little more personalized, but after a while the novelty wears off with those too.
But there’s one form of money that people often don’t consider giving: stock shares. And part of the problem is that they often don’t know the best way to give stock as a gift.
You may be surprised to find that it doesn’t have to be complicated (though it can be if you want it to). There are a few different options for gifting stock shares, and each one has its own pros and cons. If you choose the right method, stock shares can make a great, unique present – whether it’s for Christmas, a birthday, some other major life event like a bar/bat mitzvah or graduation…or just because.
The method you choose to go with depends mostly on the total value of the stock shares and who you plan to give them to. In this article, we’ll tell you four of the best ways to do it, and help you decide which one makes the most sense for you.
1. Gift Cards and Certificates
Believe it or not, these days gifting shares of stock is as easy as buying a gift card or ordering a certificate online.
Stockpile is the leader in this category, and they offer the absolute simplest way to give someone stock in any one of a long list of major corporations. All you do is choose which company you want to buy stock from, load a certain amount of money onto the gift card, and you’re done. You can have a physical card mailed to you, or you can have it delivered through email to either you or the recipient.
There are several benefits to this method. Aside from the ease of the process, there’s the convenience and flexibility of being able to purchase stock in any dollar amount, from $1 – $2,000.
This is possible because Stockpile allows you to buy fractional shares. This comes in handy if you want to give someone a share of a high-priced stock like Amazon, which trades at well over $1,000 a share, which may be more than you’re looking to spend on a gift.
The recipient also doesn’t need to have a pre-existing brokerage account. Since the company Stockpile itself is a brokerage, all the recipient has to do is go online and register the card, and they automatically have access to an account where they can track the price of the stock, and eventually sell it if they so choose.
Stockpile even allows minors to set up a joint account with a parent or guardian, meaning they can log in at any time and check the price of their own stock, and even make trades pending their parents’ approval. This makes Stockpile a great introduction to saving and investing for kids and teenagers.
With over 1,000 companies to pick from, Stockpile offers ample choice. The only real drawback is that fractional shares can be hard to sell, meaning your recipient may not be able to cash in their stock in the short term.
Still, a fractional share has real value, which could be put toward the price of a full share in the future. And regardless of whether you give someone a full share or part of a share, Stockpile serves as a cool introduction to stock market investing.
Another option along the same lines is GiveAShare. GiveAShare is even more explicitly aimed at kids, and each share of stock comes with a framed certificate of ownership in the corporation.
The list of companies to choose from is much shorter (it currently stands at 110), and unlike Stockpile you can’t buy fractional shares. Luckily, there are plenty of companies that offer affordable shares that kids will genuinely get a kick out of owning, no matter what they’re into – like Snapchat, Manchester United, and Harley Davidson, just to name a few.
GiveAShare also sells a kids book, called the I’m a Shareholder Kit, which explains how stocks work and comes with a $20 gift certificate that can be put toward a share of whichever stock the recipient wants to buy.
The main drawback with GiveAShare is that it doesn’t come with a brokerage account. So if the owner wants to sell the stock, they would have to go find a broker and open an account to do so. Nonetheless, like Stockpile, GiveAShare offers a great introduction to the concept of stock shares, and includes an element of physical ownership that kids will love.
2. Stock Transfer
If you’re looking to go with more of a traditional route, the easiest answer is to simply buy stock, then transfer it to the recipient.
Of course, this means that your recipient needs to have a brokerage account. If they do, and if your stock is held through a brokerage, then transferring is fairly easy to do, though there are a few steps involved. Generally, you’ll need to have some basic personal information about the recipient, along with your own personal and brokerage account information. You can contact your broker to find out the specific steps they require in order to transfer your stock.
If the recipient is a minor and doesn’t have an existing account, there are a few options for setting up an account in their name, but you’ll either have to be a legal guardian or have the cooperation of their legal guardian. In the following sections, we go over two of the most popular options for opening an account for a minor: custodial accounts and trusts.
3. Custodial Account
These final two methods are more complicated, and are definitely not suitable for a casual gift. Opening a custodial account or a trust is a major life choice with very real financial implications for the recipient. These are steps you’ll only want to consider if you’re looking to transfer large sums of money to a minor.
A custodial account is an account that is designated in the name of a minor, but controlled by an adult until that minor reaches legal adulthood. Generally, this happens at age 18, but a few states set the age of majority at 19 or 21.
Stock can be transferred into an existing custodial account just like it can be transferred into a brokerage account, so if the recipient already has one of these, you can follow the method we talked about in the last section.
Setting up a custodial account in someone else’s name is easiest to do if you are the legal guardian of the recipient, but you don’t have to be. You can set up a custodial account for any minor and designate their parent or guardian as the custodian.
While custodial accounts are a great way to invest and save money for a minor, there are a few potential drawbacks.
First off, custodial accounts carry a fairly significant tax burden, which changes depending on how much income is earned from the account. They can also affect the recipient’s ability to secure financial aid – so much so that many experts recommend NOT setting up a custodial account if the recipient plans on applying for financial aid for college.
The other issue is that the money comes under full control of the recipient the moment they reach majority age (again, 18 in most places). So it might be a good idea to ask yourself what you would have done if someone handed you a big pile of money at 18 years old, and consider whether the recipient you have in mind might be equally likely to buy a bus and drive all of their friends to Tijuana for a week.
Still, outside of these limitations, custodial accounts can be a great option if you want to sock away some money in the form of stock investments for a minor, and relatively speaking they’re pretty simple to set up. They’re also flexible in the sense that money can be withdrawn at any time by the custodian to be used for a wide array of expenses on the part of the beneficiary, like school, transportation, or even participation in sports or other activities.
On the other hand, if you want more control over when the money becomes available to the recipient and how they can use it, you can always opt to put it in a trust.
4. Trust
Trusts are more complicated and expensive to establish, but if the stock is worth a lot of money and you’re willing to deal with the extra work, the best part about putting it into a trust is that you can pretty much set it up any way you want.
Unlike a custodial account, which comes under full control of the beneficiary as soon as they become an adult, you can designate exactly when and in what amounts the beneficiary has access to the money in a trust. You can also stipulate what they can and can’t spend it on. So if you don’t like the idea of your money falling into the hands of an impulsive 18 year old with no restrictions, a trust might be a better idea.
There really are no limits on the rules you can stipulate in a trust, as long as it’s not barred by law. You could set it up so that the beneficiary can’t access the money until they’re 102 years old, and can only spend it on hot dogs (don’t take that as a recommendation).
Trusts carry many of the same tax and financial aid considerations as a custodial account. Because of the complex nature of trusts, you also need a highly specialized trust lawyer to assist you in setting this up – and you probably won’t be surprised to hear that these don’t come cheap.
So while they definitely have their advantages, a trust is really only a meaningful option if you’re thinking about transferring a LOT of money. Like custodial accounts, this is something you would never do without first consulting with a financial expert.
Until recently, traditional holdings like custodial accounts and trusts were the only way to give someone stock shares as a gift. Thanks to the internet, you now have simpler and cheaper options that are accessible to everyone. Which is great, because stock shares are a great way to introduce kids and teenagers to the concepts of savings, investment, and financial responsibility.
So whether you’re searching for a cool, unexpected gift for a nephew or niece for Christmas, or you’re looking to set someone up with F— You money for life, you’re sure to find an option that works for you.