Transferring Stocks

Learn to Transfer Stock

There are several situations in which a shareholder would want to transfer shares of stock to another institution:
  • changing brokers
  • divorce
  • death/inheritance
  • purchase of a business
There may be many other reasons to transfer shares of stock from one institution to another.  When initiating one of these transactions, contact the institution that currently holds the shares to find out what paperwork is required.  The information that will likely be required includes: account numbers, government identification for each account holder, account information at the receiving institution, contact information for the receiving institution, and authorization paperwork for the stock transfer.

Some stock transfer situations are simple and can be done with minimal paperwork, while others entail more verification.  These will likely require a signature guarantee to absolve the receiving institution of liability in the event of fraud related to the signature of the transfer document.  A medallion stamp can be received from an agent who is a qualified member of one of the signature guarantee programs recognized by the SEC.

Typically there will be a qualified agent at the bank or brokerage house where your shares currently reside.  This person will usually provide a signature guarantee at no cost.  Some banks and brokers are not willing to issue a signature guarantee.  In this situation, it is possible to receive the guarantee from another bank or brokerage house where the account holder(s) currently does business.

How to Transfer Stocks With a Signature Guarantee

There are many reasons to transfer stock. You can transfer shares of a company as a payment of a debt, as a donation, or as an inheritance. Regardless of the reason, the process is about the same. There can be significant tax advantages to making a payment with shares of stock instead of cash.

You can use stock to pay for things

You can pay for things with stock to avoid capital gains taxes. For instance, you can donate stock to approved charities and avoid the capital gain. Also, you can leave shares of stock to your heirs. There may still be some taxes incurred, so work with a qualified tax professional. A tax professional can guide you through the intricacies of the tax code and help you make the best decisions for your personal situation.

You may also wish to pay for something with shares of stock. This can be common in the purchase of a business.

The process of transferring shares is similar regardless of the reason.

The process of transferring stock shares

In order to transfer stock to another entity from your account, you will need to gather some information from the recipient's account, including account number and the name on the account. Then you will talk to the bank that currently holds the stock and fill out the appropriate paperwork (a Transfer of Assets form). This allows the bank to release the shares from your account and to transfer them to the outside account. All owners on the account will need to sign the form. Also, a medallion signature guarantee will almost always be required to complete the process. A signature guarantee is a guarantee issued by an authorized transfer agent at the bank where the shares are currently held. It is a guarantee against fraud.

Understand the tax implications

There can be large tax advantages when transferring shares of stock as payment. In order to maximize the benefits, you should work with your tax advisor. An attorney or accountant can help you work within the bounds set by the IRS for these transactions.