If you own stocks, you have the legal right to transfer ownership to someone else. There are no penalties or rules prohibiting the transfer of assets. You do not have to sell the shares either. The method used to transfer your stock depends on how your stock is currently held. When you transfer stock shares, tax implications may arise for the donor and the receiver.
If you are the current owner of stocks, you have the legal right to transfer the ownership of these stocks to another individual. As part of this transfer, you do not have to sell the shares you currently have.
Paper Stock Certificates
If the stock is held in the form of a certificate, you must physically transfer it. Complete any information required pertaining to yourself and the recipient, such as the new shareholder's name, address, and tax identification number or Social Security number. Endorse the certificate by signing it on the back in the presence of a guarantor, typically the bank or the broker. The recipient of your stock can then submit the stock certificate to his brokerage firm for deposit.
Electronic Stock Shares
If your stock is held electronically, initiate the transfer process by completing a transfer request form through your broker. The forms may vary depending on the company, but most require the same basic information. Generally, you will need to provide your personal information, name of the company, current account number, number of shares being transferred and the recipient's personal and broker information. Some forms require you to have your signature verified with a Medallion Signature Guarantee. The guarantee is a stamp used to ensure the transaction is legitimate. An eligible guarantor institution, including a bank or a brokerage, provides the Medallion Signature Guarantee.
Gift Tax for Donors
Stocks you give away are classified as gifts. Under federal law, you are required to pay taxes on gifts when you surpass your lifetime gift limit or the limit per person for the year. In 2018, the gift tax law allows you to give up to $15,000 to individuals each year without paying a gift tax. If your gift exceeds that amount to any one individual, you must report it on your tax return, but you do not have to pay until you reach your lifetime limit of $11,180,000 million on stock transfers. For example, if you give your daughter shares of stock that are valued at $18,000 this year, $3,000 counts toward your lifetime limit. For married couples, the annual exclusion amount doubles, allowing couples to gift up to $30,000 to each person. Gifts to spouses are excluded from taxes.
Taxes for Recipients
If you transfer your stock shares to someone else, you are not liable for any taxes, aside from the potential gift tax. Although there is no gift tax for the recipient, he will be responsible for any capital gains taxes assessed when the shares are sold. Capital gains or losses are based on the donor's original cost basis, the donor's holding period, and the fair market value at the time of the sale.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.