Want to know a little-known fact? You can gift stocks worth up to $19,000 per person each year without any IRS reporting requirements.
Stock gifting isn’t just for the wealthy anymore. Most presents lose value right after opening, but stocks might grow more valuable as time passes. Married couples who file jointly can double down – they’re able to gift up to $38,000 to one person.
The real beauty lies in the tax benefits. Recipients only pay capital gains taxes when they decide to sell their shares. You can even gift portions of high-priced stocks if budget is tight.
This piece will take a closer look at ways to gift stocks to your loved ones through broker transfers, custodial accounts for minors, and trust funds. You’ll learn about tax implications, smart stock selection, and why this could become the most meaningful gift that ever spread joy.
Want to give something that could grow in value forever? Let’s explore your options!
Why Gifting Stock Is a Smart and Lasting Gift
Gifting stocks stands out as a powerful way to create lasting value for your loved ones. Unlike physical gifts that depreciate, stock gifts continue growing in value long after the special occasion.
How stock gifts grow over time
Stock gifts create wealth through compound growth. Goldman Sachs reports that stock market returns averaged 9.2% over the last 140 years. The S&P 500 has performed even better, with average returns of 13.6% in the past decade. A modest stock gift today could multiply several times throughout the recipient’s life.
Children get the most benefit since they have decades ahead for their investments to grow. The shares stay in a custodial account until they become adults (18-21 based on state law), giving them maximum time to appreciate.
Why it’s better than cash or material gifts
Stock gifts offer clear advantages compared to traditional presents. A newer study, published by Dr. Russell James, showed organizations receiving non-cash gifts (particularly securities) grew 66% in five years. Those taking only cash saw just 11% growth.
The same logic works for personal gifts. Stocks represent actual business ownership and teach valuable lessons that cash cannot provide. As one expert puts it, giving stock tells someone “I think you’re skilled enough to direct your investment journey”.
Giving appreciated stock instead of selling it for cash can also create tax advantages for everyone involved. Recipients get your cost basis but might pay lower capital gains taxes when they sell, especially in lower tax brackets.
Can you gift stocks to someone legally?
Yes, you can. Just contact your brokerage to transfer shares into the recipient’s name. The 2025 gift tax rules allow you to give up to $19,000 per person ($38,000 for married couples filing jointly) without federal gift tax reporting.
Custodial accounts provide the legal framework for gifting stocks to minors. The child owns these accounts right away, though an adult manages the assets until they reach the legal age of majority.
Ways to Gift a Stock to Different Recipients
You have several quick ways to gift stocks based on who’s getting your financial gift. Let’s look at what makes each method special and what you need to think about.
Gifting to kids through custodial accounts
Custodial accounts help you transfer stocks to minors who can’t legally own investments themselves. These accounts work under UGMA or UTMA laws, and an adult manages them until the child grows up. Here’s something crucial: any money you put in these accounts becomes the child’s property right away as an irrevocable gift. The child gets full control when they reach their state’s legal age (18-25, depending on where you live). Remember that these accounts might affect financial aid chances since they count as the child’s assets.
Gifting to adults via brokerage transfer
Your broker can help you transfer stocks to another adult electronically. You’ll need to give written permission. The process needs specific details like the recipient’s name, account number, social security number, and information about the shares you’re sending. Transfers between Fidelity accounts usually take 1-4 business days. If you’re sending to other brokerages, you’ll need their DTC (Depository Trust Company) number.
Gifting to a spouse or partner
Stock transfers to your spouse come with special benefits. The best part? These gifts don’t face any gift tax whatever their value. This makes them great tools for estate planning that could shrink your taxable estate.
Gifting to charity for tax benefits
Direct donations of appreciated securities to charities create benefits for everyone involved. You skip capital gains taxes (up to 23.8%) on the appreciation and might claim the full market value as a tax deduction. These deductions usually max out at 30% of your adjusted gross income.
Using DRIPs and trusts for long-term planning
DRIPs (Dividend Reinvestment Plans) work well for ongoing gifts by automatically buying more shares with dividends. Trusts give you more control than custodial accounts and let you decide exactly how recipients use money from sold shares.
How to Choose the Right Stock to Gift
The perfect stock gift balances growth potential with personal meaning. This guide will help you make your financial present both meaningful and valuable.
Blue-chip vs. growth stocks
The fundamental choice between stability and potential comes at the time of gifting stocks. Blue-chip stocks offer fortress-like balance sheets and time-tested business models that make safer gifts. Wall Street analysts currently recommend several buy-rated Dow stocks including Nvidia, Amazon, Microsoft, and Apple. Growth stocks provide higher potential returns despite increased volatility—perfect for recipients who have longer time horizons.
Using ETFs for diversified gifts
Exchange-traded funds (ETFs) make an excellent choice to gift multiple stocks in one transaction. These investments bundle numerous companies together and substantially reduce risk through diversification. Broad market ETFs that track indices like the S&P 500 or sector-specific options can arrange with the recipient’s interests—from airlines (JETS) to technology.
Thinking about ESG and ethical investing
Environmental, Social, and Governance (ESG) investing helps you gift stocks that match values. This approach assesses companies based on:
- Environmental impact (green practices, emissions reduction)
- Social responsibility (employee treatment, community relations)
- Governance standards (ethical leadership, transparency)
Young recipients who prioritize corporate responsibility find this values-driven approach appealing.
Can you gift fractional shares?
Absolutely! Fractional shares let you buy portions of expensive stocks for as little as $5. These breakthroughs make premium companies like Amazon or Google available gift options whatever your budget. Most major brokerages now offer this feature with no commissions for online trades.
Matching stock to recipient’s interests
Maybe the most crucial factor is personal relevance. Children connect better with recognizable companies—Disney, Nike, Starbucks, or Coca-Cola create more excitement than stocks with better valuation metrics. Adult recipients’ hobbies, career field, or consumer priorities should guide your choice. This personal touch transforms a financial asset into a thoughtful, engaging gift.
Tax Rules and Legal Considerations
Tax implications of gifting stocks matter a lot to givers and recipients. Nobody wants surprise tax bills. Let’s look at the rules that shape how and when you should transfer shares.
Gift tax limits and IRS reporting
The IRS lets you gift up to $19,000 per person in 2025 ($38,000 for married couples) without any gift tax reporting. Gifts beyond this annual limit count against your lifetime exemption of $13.99 million. You’ll need to file Form 709 if you exceed annual limits, but actual gift taxes kick in only after you go past lifetime exemptions.
Capital gains tax for the recipient
Recipients don’t pay taxes when they get your gift, but they’ll face capital gains tax once they sell. This creates a smart tax-planning chance – gifting appreciated stock to someone in a lower tax bracket could mean 0% capital gains tax instead of your 15% rate. This works great if you have independent young adults earning under $48,350 (2025).
Cost basis and holding period rules
Recipients inherit your original cost basis and holding period when you gift stock. To name just one example, see what happens with $12,000 worth of stock you bought five years ago for $7,000 – they’ll owe taxes on $5,000 profit if sold right away. But losses follow different rules – if the stock’s market value at gifting was lower than your purchase price, the recipient uses that lower value to calculate losses.
How to avoid the kiddie tax
The “kiddie tax” hits children’s unearned income (including stock dividends) over $2,600 and taxes it at parents’ rates. This affects dependents under 18 and full-time students under 24 who don’t earn enough income. Growth stocks with minimal dividends or 529 plans make better gifts since 529 plans aren’t subject to kiddie tax.
Can you transfer stocks to another person without penalty?
You can transfer stocks between individuals with no penalties except possible brokerage fees. Just contact your broker with the recipient’s account information. Family transfers often move faster through electronic transfer systems.
Conclusion
Stocks make amazing gifts that can create lasting value for people you care about. You need to know the best ways to give stocks and what to think over to make your financial gift count. Regular presents lose value over time, but stocks can grow into something bigger through compound interest.
Picking the right stocks needs both smart financial thinking and a personal touch. Blue-chip stocks give you stability, while growth stocks could bring better returns if your recipient plans to hold them longer. On top of that, fractional shares make expensive stocks available no matter your budget, and ESG investments let you line up with what matters to you.
The tax benefits make stock gifting a smart move. Most Americans can give up to $19,000 to each person yearly without dealing with gift tax paperwork. Married couples who file together can double this to $38,000. Just note that your recipients get your cost basis and will pay capital gains tax when they sell.
Each recipient needs a different approach. Kids do best with custodial accounts, adults can get direct brokerage transfers, and charitable donations create benefits for everyone through tax deductions. Every method has its perks based on what you want to achieve.
Stock gifts really shine as teaching tools that help people learn investing basics. This makes them perfect for young people who can see how markets work, watch compound growth happen, and experience business ownership firsthand.
Next time you need a meaningful gift, stocks could be your answer – they keep giving long after celebrations end. Your smart choice might get someone interested in finance for life, growing into something nowhere near the original investment. This mix of growth potential, tax benefits, and learning value makes stock gifting one of the best ways to show you care about someone’s future.
Disclaimer: Tax and gifting laws vary by location. Please consult a licensed financial advisor or tax professional before making any stock gifts.
