There’s a million different things you can gift your kids over the years. You can give them cars, apartments, furniture, pets or even stocks. Now stocks aren’t the most exciting gift, and kids might not understand the importance of stocks at first. But a good stock could mean good things in the future. If you plan on giving or leaving your children some of you stock, there are a few things to keep in mind.
A good arrangement for giving your child stocks, is to create a trust for your child to serve as the receptacle of company stock. If you put the stock into a trust, the trust can then authorize periodic distributions to your child as appropriate for the child’s support, maintenance, and other purposes. Also, incase your child dies, the trust can designate how the stock will be passed. The means the trust, not the child’s will or estate documents, will direct how the stock passes upon the child’s death.
To help with the trust, you can have the trust vest your child with the power of appointment. This lets your child override the trust’s provisions and direct how the stock in the child’s trust will pass on. Your child’s power of appointment can be as broad or as restrictive as you wish.
It’s important to know that property held in trust will retain its separate property classification. This will hold during a marriage and if there is ever a divorce or separation. In the event of a divorce, the trust would remain the donee’s property.
A trust is not the only way to protect gifted assets such as stock. A stock restriction or buy-sell agreement can be created entitling the company or the other shareholders of the company to purchase the shares upon a shareholders death.
