# How to buy stock as a gift for a child in Canada?



## kirk (Apr 12, 2009)

For Xmas this year, I am looking to buy a stock or two for my niece who is 10 years old. I'd like to buy a stock like Tim Hortons, a Canadian bank stock, or some other Canadian company stock. If they offer dividends, all the better. Does anyone know how I would go about doing this? Would I just buy a stock, get a certificate and give the certificate? Should I open an RESP for them and buy it through that (perhaps giving them more every year)? Any other ways to do something like this?

The closest thread I could find on this was http://canadianmoneyforum.com/showthread.php?t=761. I didn't have any luck finding any good instructions for Canadians on google.


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## CanadianCapitalist (Mar 31, 2009)

kirk said:


> For Xmas this year, I am looking to buy a stock or two for my niece who is 10 years old. I'd like to buy a stock like Tim Hortons, a Canadian bank stock, or some other Canadian company stock. If they offer dividends, all the better. Does anyone know how I would go about doing this? Would I just buy a stock, get a certificate and give the certificate? Should I open an RESP for them and buy it through that (perhaps giving them more every year)? Any other ways to do something like this?
> 
> The closest thread I could find on this was http://canadianmoneyforum.com/showthread.php?t=761. I didn't have any luck finding any good instructions for Canadians on google.


You can open up a RESP and name the child as the beneficiary. It's perhaps the cleanest option because there are no tax issues.

You can also buy stocks and give your niece the stock certificate. Check out 

http://cdndrips.googlepages.com/

for more information on how you can go about getting stock certificates. There is a tax issue here though. All dividends will be attributed to you and taxed in your hands. 

I've never done either of this myself, so other posters might want to chime in.


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## Dr_V (Oct 27, 2009)

CanadianCapitalist said:


> You can open up a RESP and name the child as the beneficiary. It's perhaps the cleanest option because there are no tax issues.


It's important to note that RESPs come with numerous risks which may not initially be evident.

In particular, in the event of Kirk's death, RESPs *do not* usually pass outside the estate to the named beneficiary. That is to say, their contents are *not* held in trust for the beneficiary in the event of the subscriber's death. Because they're considered an asset of the subscriber, upon death, they become an asset of the estate subject to the terms of the deceased subscriber's will. This means that they're also an asset from the perspective of creditor claims and probate fees (estate settlement & administration taxes).

If Kirk opens an RESP for his niece, he'll definitely want to consider updating his will....


K.

p.s. I've been struggling with the estate and "contingency" planning myself for an RESP for my 6-week old son. There are some potentially severe repercussions that I don't really like if I put more than $50k in the RRSP, and then either I die or my child doesn't partake in to an accredited post-secondary education program.


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## Jon202 (Apr 14, 2009)

First off, congratulations for thinking about a getting your niece a gift which will be far more valuable than any toy. I regularly buy shares for my children / nieces / nephews to hopefully teach them (and their parents) investing.

One options is stock, out right. For minors, this is usually through an "informal" trust. So the name on the share certificate would be "Mark R. Smith in trust for Child T. Smith."
There are many different ways to accomplish this, for both Canadian and U.S. stocks, and each way offers different costs and lengths of time to complete. Until age of majority, taxes are attributed to the parent. DRIPing comes into play for longterm growth if applicable to the company.

RESP is great scenario as well. Ideally, the parent would have opened one already and you could give the cash to the parent to add to the account.
Free grant money from the Gov't is a no brainer, and any minimal risk is insignificant so long as the money isn't used in a group RESP plan.
The list of qualifying program is quite broad so too me that really isn't much a risk.


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## kirk (Apr 12, 2009)

Thanks for the responses. I didn't realize that I could open a RESP for someone a neice. That might be the way that I go for a gift this year.

I'll look into http://cdndrips.googlepages.com/ a bit more as well. I've followed that procedure for a couple of my own stocks recently. I never thought of applying it in this case. I'll have to check in on that. Might be a little too late to get it done for Xmas this year.

Kirk


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## leslie (May 25, 2009)

I agree the TFSA is the cleanest, tax-effective way, but I presume the parents will be dealing with that and the RESP as well.

I think your idea of a gift could be improved by having her pick her own stock (along with you monitoring the situation). If the purpose is to get her 'involved' simply dumping your pick on her won't get her interested. Your not knowing about stock certificates makes me think that you are a newbie as well, so just put your heads together.

Open an account with the name "your name in trust for her name". All the financials have these informal trusts. Only income (interest and dividends) get allocated back to you for claiming on your own tax return. Capital gains does not. So picking a stock without dividends is best. 

If you leave the dividends/interest in the account, the income earned by that reinvestment does NOT get allocated back to you. That means things rapidly get very messy. You can get around the problem by opening two accounts and moving the income earned each year to that 'clean' account. But all this is a lot of work and may destroy her interest. Better stick to capital gains stocks.

I presume you want the stock certificate in order to have something tangible for her to open and hold up on Christmas day, etc. Today nobody owns stock in their own name. They are held in the name of your broker (in trust for you). All brokers provide a mechanism for you to register it in your name, but it is very expensive. And of course if she will be choosing the stock, it won't be bought yet,

Why not get some good card-stock and certificate software and create your own Acme Holding Company stock certificate as a proxy for under the tree?


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## Jon202 (Apr 14, 2009)

leslie said:


> I presume you want the stock certificate in order to have something tangible for her to open and hold up on Christmas day, etc. Today nobody owns stock in their own name.


It gives me no pleasure to say this, but this statement is not entirely true. More accurately would be "today, only a small portion of shareholders own stock in their own name."

There are thousands of Canadians (including myself) who are direct registered shareholders of Canadian corporations and trusts who participate in DRIP and SPP plans. No middle man(broker). Of those, some have paper certificates and some don't. But all started with a paper certificate.

In the USA, it's the same deal as well. But alternatively the paper certificate isn't required yet there is a market for giving just 1 share in certificate form as a unique gift :

http://www.oneshare.com/

As well as gifting a share to starting a DRIP/SPP:

http://www.giftsofstock.com/


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