Is it possible to buy stock as a gift for a minor without involving the guardians?

Question

I always liked the idea of buying an investment for young children instead of a traditional gift. It seems that they will get plenty of toys from others, and as a parent I know that there are often too many and they clutter the house. Meanwhile, for the first 5-10 years they're too young to realize they're getting one less toy. While something like stock has a huge amount of time to appreciate.

When an old friend had his first child I talked him into setting up a UTMA with himself listed as the custodian so that I could buy the child a share of Tesla for his first birthday. It worked, but it took 3 months of trying to follow up with him to get the paperwork filed to open the account. Meanwhile, the stock I bought for the child for birthdays 2 and 3 are still sitting in my account as I'm waiting to find out the child's account number to do the transfer. So going this route is not something I really want to do again; it seems like there's just too much hassle for both parties.

I have other friends who are having kids now and I'd like to continue giving stock as a gift, but I don't want to inconvenience them or get stuck with shares belonging to several different people in my account with no easy way to know what belongs to who. Is it possible to continue this stock-gifting tradition in some other way?

Notes:

I understand that I could be listed as the custodian on a UTMA, which simplifies some of this. However, the parent would need to give me sensitive information, such as the child's social security number, which is awkward to ask others to share.

I know that What things do I need to consider if I want to gift units of a fund or stock to some one who is not related? is similar, but that question assumes the recipient already has an account setup.

If it matters I, and (almost) all the recipients, are residents of Pennsylvania.

Answer 1

You should talk to a lawyer. One solution I can think of is using a trust. Keep in mind that that may complicate things (non-revocable trusts are taxed on income not distributed, and revocable trust means you effectively keep the owenership of the stock).

If you don't mind paying taxes on the dividends and keep the stocks in a living trust - that would be, IMHO, the simplest solution. That would, however, invoke the gift/estate tax at the value of the stock when the ownership actually passes to the intended receipient (i.e.: you die/gift the stock to the child).

It would be very hard to pay the gift tax now and avoid getting the childs SSN and opening an account for the child with it.

Answer 2

This is an old question, but a new product has popped up that provides an alternative answer.

There is a website called stockpile.com that allows you to purchase "stock gift certificates" for others. These come in both electronic and traditional physical form. This meets my question's original criteria of a gift giver paying for stock without having any of the recipient's personal information and thus maintaining the gift's surprise.

I should note a few things about this service:

• It is relatively new and has few reviews, and I have not tried it myself.
• If the recipient does not take the time to complete the setup, then your investment is lost, much like a traditional gift certificate.
• The costs seem to be higher than traditional brokerages, especially if making bulk purchases and transferring individual shares throughout the year. Small gifts (< $25) could takes years to even recover the purchase costs.
• You are purchasing fractional shares of stock, which are then held by Stockpile.

Despite these limitations I wanted to post it here so others were aware of it as an option. If no other alternative will work and this is what it takes to get a parent interested in teaching their child to invest, then it's well worth the costs.