When you want to make a gift to a relative for estate planning, or to your favorite charity either for the tax benefits or to help out those less fortunate, you can give shares of stock that you own. You must transfer the ownership of the stock correctly so that whoever you transfer the stock to is the registered owner, particularly if certificates were issued. You also must be careful of the tax ramifications of making a gift to someone or an organization that's not a charity.
If you purchased the stock through a brokerage, the firm purchased the stock for you either in your own name or in its name, holding the shares in your account. The brokerage can also handle the transfer to the new owner for you. It does this by opening a brokerage account for the recipient of the stock, then transferring the shares to the new owner and placing them in that account.
If you purchased the stock direct from the issuing company, or if you purchased it through a broker and requested copies of the stock certificates, the official record of your ownership is recorded by the company's transfer agent. You can just transfer the stock certificates to the gift recipient, but you should also contact the company's transfer agent so that it can register the transfer of ownership and record the new owner. Some companies use an outside trust company as their transfer agent, and others handle these duties in-house. Contact the issuing company and ask for its process.
When transferring stocks to an individual, you might be liable for gift taxes if the value of the stock and any other gifts that you have given that individual exceed $14,000, as of 2013. The gift value is calculated based on the value of the stock at the time you make the gift. You and your spouse may each make a gift of $14,000 to any one person, for a combined gift amount to $28,000. If the value of your gift exceeds these amounts, you might be able to avoid gift taxes by applying the value of the gift toward your lifetime estate tax exemption through use of the unified credit.
If you give your stock to a non-profit charity, you can take a tax deduction for your donation. You can deduct the value of the shares at the time that you donate them. It is better to donate the shares without selling them first. If you sell the shares at a higher price than you paid for them to donate the cash, you will need to report the capital gain on the stock and pay taxes on that gain, and then deduct the cash that you donate to the charity.
By utilizing a donor-advised fund, you can donate your shares to a specialized account. The fund will sell the stock, holding the money for eventual donation to the charities you choose. You can deduct the appreciated value of the stock and not pay capital gains taxes.The donor-advised fund also takes care of writing letters explaining the gift, and it allows you to remain anonymous if you wish. These funds usually charge a service fee each year. They have requirements for minimum initial and annual donations if you want to keep your account going indefinitely.