How To Transfer Shares To Your Kids

How Transfer Shares To Your Kids

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 money to invest one day, I would buy stocks” (at the time, trading was usually $30 – not $5.99). It turns out that you don’t need a lot of money and you don’t have to pay any fees!!!

It was quite marvellous when I learned about buying shares with Computershare directly from the companies. It’s something I learned from The Lazy Investor by Derek Foster – I 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.

If You Own Shares

This approach works if you own shares and you need to have the actual shares (as in the paper shares). You may need to order it the first time and there would be a cost to doing so but you are already with Computershare, it’s easier as you just need to fill out the forms.

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 to really understand all the forms. 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 Scotia Bank branch near my home does do them so my hunt came to an end. If you can find a Computershare office near you, you can get it done at their office as well.

If You Don’t Own Shares

There is a group of investors that help each other get going with Computershare through the DRIPInvesting forum. In essence, you make a request to a stranger to transfer shares in your name for the price of the share with a minimal thank you fee for doing all of the heavy lifting.

I got started myself by receiving shares from strangers and the same can be done for your kids. You can have the shares 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.

The Results

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 :)

Just be aware that it will take time. It will be much longer than opening an account and buying shares but then kids can’t have a discount broker account until they are 19. If you can get them started around 10 and put the birthday gifts money into shares, you can compound fast.

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