The Gift of Stock: A Treasure That Grows
Imagine wrapping up a present that can appreciate in value over time, much like fine wine. Welcome to the world of gifting stocks! It's simpler than you might think and it comes with a treasure trove of benefits for both you and the lucky recipient.
Unlocking the Power of Gifting Stocks
Yes, you read that right! You can actually give stock as a gift. This means the receiver stands to gain from any increase in the stock’s market value. Parents can pass on shares to their children through a custodial account, while transferring stocks to adults can be done with just a few clicks.
Invest Early, Benefit Later
Seasoned investors often lament, "If only I'd begun investing earlier." By gifting stock, you can help those close to you, especially children, turn that old adage into reality through the compounding benefits of long-term investing. Pair this with the fact that you may enjoy tax benefits, and gifting stocks becomes even more appealing.
Tax Benefits: A Win-Win Situation
Consider this: If you own stock that has significantly increased in value, selling it would mean paying taxes on those gains—potentially up to 15% if it’s a long-term investment. Instead, consider gifting that stock. The recipient takes on the appreciation, which could land them in a lower tax bracket, perhaps even incurring zero capital gains tax if they sell the stock later. It’s a win-win!
Another Approach to Gifting Stocks
But wait, there's more! You can also purchase new stock or other securities to gift. Charitable giving is another pathway to consider—donating appreciated stock rather than cash can save you from capital gains taxes and even provide the charity with a tax-exempt benefit.
Building a Lasting Legacy
Looking to leave a legacy? Gifting stocks can be a savvy way to make significant transfers while avoiding potential taxes on liquidated assets. In 2024, the IRS allows you to gift up to $18,000 per individual recipient without tax implications. Additionally, married couples filing jointly can double that, gifting as much as $36,000 annually to any one person. This limit applies to friends and family alike, so get creative!
Simple Processes for Gifting Stocks
For children, a custodial account offers a straightforward method to initiate their journey into investing. You can transfer existing shares or purchase fresh stocks to put into the account, which they will control once they reach the legal age. Just keep in mind the "kiddie tax" that comes into play if their unearned income surpasses $2,500.
The Easy Transfer for Adults
Gifting to adults? If they have a brokerage account, transferring stock is a breeze! You simply need their account details to facilitate the transfer. If they don’t have an account, why not assist them in setting one up as part of your thoughtful gift?
Embracing the Future of Gifting
Start your gifting journey online with your brokerage; simply choose the option to give away shares you already own. If you wish to gift something you don’t possess yet, just make the purchase and then pass it along. With stock gifting, you’re not only sharing wealth but also fostering a culture of financial literacy and growth among your loved ones.
