How To Transfer Shares To Your Kids

How To Transfer Shares to Children

For the longest time, I have been an income-focused investor. I remember when I started working, I did not have much money to invest and I invested in mutual funds telling myself “if I can have more to invest one day, I would buy stocks” (at the time, trading was usually $30 – no $6.99 options back then). It turns out that you don’t need a lot of money and you don’t have to pay any fees!!! It was quite marvelous when I learned about buying shares with Computershare or Canadian Stock Transfer directly from the companies. It’s something I learned from The Lazy Investor by Derek Foster – strongly recommended if you are a beginner dividend investor.

Investing with the transfer agents was my doorway to getting my children started. It’s simple, you can invest small amounts and there are no fees. What better way than to teach the power of compound growth to your kids. The one asset they have that we, adults, run out of is time. They have all the time on their side and if they can understand what time can do to their investments, they are off to a good start. They will think about saving rather than trying to live a life of consumption. You can even invite them to invest their allowance if you provide them with one.

There are basically 2 ways to transfer shares to your children. My friend did it one way and I did it the other way. Both worked just fine.

Transfer The Shares Yourself

Once you are set up with a transfer agent, transferring shares to others can be done by filling the appropriate forms. My recommendation is to call Computershare or Canadian Stock Transfer (CST) to really understand all the forms the companies you are transferring shares from requiring you to fill. In my case, it was the same form I needed to fill for each blue chip companies I transferred (Telus, Bank of Montreal and Fortis). The agent also recommended I write instructions on the share transfer just to be clear on what I wanted to happen and I strongly recommend you do so.

Once you have the forms, you need a signature guarantee. That’s actually quite challenging it turns out. You can’t just walk into any branch and ask for a signature guarantee. For example, Royal Bank doesn’t do them anymore for legal reasons (I was told at one of their branches). It turns out that my account manager at my Scotia Bank branch does do them so my hunt came to an end.

To my surprise, it turned out that Computershare has an office in the same building as my branch downtown and I simply had to walk up to deliver the forms. That was quite a bonus. With the forms delivered, all I needed to do was to wait to receive the first share certificate for my children. I opted to do them “In Trust” as I can still control the proceedings as they are still young.

Use The Forums To Have Shares Transferred

Just like you would have shares transferred in your name using the forum at “The DRIPInvesting Resource Center“, you can have them transferred in your children’s name. The principle for your children is the same as for yourself. The only difference is that you have to decide between “in trust” or in their name.

In retrospective, it would have been easier to use the forums to get my kids started but now that I know what to do, either way, is fine but I have heard of some people having difficulties getting a signature guarantee. If you aren’t sure you can get one, just go the forum route. It’s simple and someone else does the work 🙂

Image: Grant Cochrane / FreeDigitalPhotos.net