Gift mutual fund: Can I gift a mutual fund to someone? | Value Research (2024)

FAQs

Gift mutual fund: Can I gift a mutual fund to someone? | Value Research? ›

Mutual fund units cannot be gifted or transferred.

Ans: Mutual fund units cannot be gifted or transferred as per the Securities and Exchange Board of India's (SEBI) regulations, 1996.

Making a gift of securities or mutual funds offers you the chance to support our work while realizing important benefits for yourself. When you donate appreciated securities or mutual funds in support of our mission, you can reduce or even eliminate federal capital gains taxes on the transfer.

In the case of mutual funds, the only method for transferring units to another person, apart from inheritance, involves the seller selling the units on the open market, and the prospective buyer acquiring them at the prevailing market price.

If the stock recipient is the age of majority, typically 18 or 21, stocks can be given through a regular brokerage account such as at Charles Schwab, Fidelity Investments or Vanguard. You can purchase shares within your brokerage and transfer them to the recipient, but this could incur a fee.

Donating shares of stocks or mutual funds is a great way to help those in need. Donating shares of stocks or mutual funds is a great way to help those in need.

If you move between mutual funds at the same company, it may not feel like you received your money back and then reinvested it; however, the transactions are treated like any other sales and purchases, and so you must report them and pay taxes on any gains.

Consider the potential impact of capital gains taxes

If you gift cash, generally there are no income tax consequences for the recipient, though there could be gift and estate tax implications to the donor. But if you give appreciated securities, the capital gains taxes can be significant.

So if you want units to be in a relative's name, then you need to transfer money first to the receiver's account. You will then be able to use that amount to invest in the fund by their name. The only scenario in which mutual fund units can be transferred to another is in case of the demise of the unit holder.

Mutual Fund Shares

The transfer of a mutual fund results in a charitable deduction equal to the number of shares times the value as of the end of the day on the date of transfer. If the gift is given on a non-trading day (when there is no valuation), then the last prior closing valuation will be used.

What happens to mutual funds when someone dies? ›

However, it's important to note that many mutual funds have default beneficiaries built into them in case no beneficiaries are named by the owner. If the owner dies, the default beneficiary would be the owner's spouse, and if there's no living spouse, the assets would transfer to any children of the owner.

Generally, you pay a trade fee for every sale and every purchase you make, even if you buy and sell at the same time. However, if you're moving money from different mutual funds within the same fund family (funds managed by the same investment company), you can choose to place an exchange and pay only one trade fee.

Funds are switched when transferred from one investment plan to another. Investors can switch between two distinct schemes, whereby money is removed from fund A by placing a sell order and invested in fund B.

Technically it is not possible to “gift” mutual funds to a chosen person. Remember, mutual funds are capital instruments but unlike the other cap instruments like property or shares in companies, it cannot have a name transfer by a gift deed or similar.

Typically, individual stocks are given; however, bonds or mutual fund shares are also attractive gift options. Outright gifts of securities can be made quickly, and these gifts let you do more with your gift because of the very attractive tax benefits.

The mutual funds will be transferred to the designated nominee if you do not have a will, as stated by the deceased when purchasing the mutual funds' units. However, there may be times when the nominee differs from the legal heir. There is no compulsion here.

If you're giving money in a way that it can increase in value through an investment, you essentially pass on a capital gains tax liability along with the gift. Be sure the recipient understands they may have to pay taxes on gains.

How to gift stock to a child. There are a few different ways to buy stock for another person. You can transfer shares from your brokerage account to the recipients brokerage account, you can physically transfer the stock in certificate form, or you can buy the stock in the recipients name.

Mutual fund accounts allow owners to name beneficiaries—in the event of the owner's death. Mutual fund owners can set up a transfer-on-death (TOD) provision whereby the fund's assets would transfer to the beneficiary.