With in kind transfers, you can avoid these tax consequences since you're just moving assets from one place to another.
Considerations: Moving stocks from one broker to another
You have two options: In-cash: Your original institution will liquidate your assets and transfer the funds to the receiving institution. In-kind: You have your account transferred "as-is" and assets are moved over in the same form.
You and other investors who want to avoid paying tax on stocks that have appreciated, will “sell” (in actuality contribute) and reinvest, through a swap. This process involves swapping your appreciated shares for a diversified portfolio of stocks of equivalent value, effectively deferring capital gains tax.
Is it safe to keep more than $500,000 in a brokerage account? It is safe in the sense that there are measures in place to help investors recoup their investments before the SIPC steps in. And, indeed, the SIPC will not get involved until the liquidation process starts.
Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
Disadvantages of Having Multiple Accounts
Complexity and confusion can occur if the partnership lacks effective communication, Voyles says. "It's more important than ever for there to be open and free-flowing communication with clients who are with multiple brokers," he says.
An easy and impactful way to reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
The annual gift tax exclusion entitles you to give away up to $17,000 per person per year as of 2023. You can use the lifetime exemption if the value of the stock is more than the annual exclusion. The lifetime exemption is $12.92 million as of 2023.
Current tax law does not allow you to take a capital gains tax break based on your age. In the past, the IRS granted people over the age of 55 a tax exemption for home sales, though this exclusion was eliminated in 1997 in favor of the expanded exemption for all homeowners.
How much does it cost to transfer a brokerage account? Transfer fees may hold you back, but many brokerage accounts handle the fees when you transfer funds because they want your business. The fees for transferring a brokerage account over can range from $30 to $150.
If you've got a large chunk of cash, you might secure better returns outside of a brokerage account. You could lose money. If your money is swept into a money market fund, that cash won't be insured by the FDIC or SIPC. It's possible to lose money.
Most brokerages charge a fee to transfer or close your account. Some brokerages will offer to reimburse transfer fees incurred by new customers. In general, you can avoid or minimize brokerage account fees by choosing an online broker that is a good match for your trading and investing style.
Transferring funds between different stock trading accounts is generally not considered a sale of assets for tax purposes.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
You don't have to pay capital gains tax when you give away stocks. The person who receives the stocks, however, will face capital gains tax if they earn money when they sell the stock.
Key takeaways
You can gift stocks to children through custodial accounts. For adults, you can transfer shares from an existing investment account to the recipient's brokerage account.
Families like the Waltons, Kochs, and Mars can avoid capital gains taxes forever by holding onto assets without selling, borrowing against their assets for income, and using the stepped-up basis loophole at inheritance.
To qualify for the principal residence exclusion, you must have owned and lived in the property as your primary residence for two out of the five years immediately preceding the sale. Some exceptions apply for those who become disabled, die, or must relocate for reasons of health or work, among other situations.
A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.
"For example, we see many investors at Betterment use us effectively alongside a stock trading app," he says. Investors with higher investment balances also tend to use more than one brokerage account, says Reiches.
Most investors who compare Schwab and Vanguard in terms of customer service and support find that they prefer Charles Schwab's offering. The firm offers more extensive data, research, and other educational resources than Vanguard does. This makes it an attractive option if you want guidance and support.
However, it may not be the best idea to keep more than $250,000 in cash at a specific brokerage firm. “But when your money's fully invested, you do not have a risk,” Clark says. Beyond that, investing through a company that charges you high or even moderate fees is much more likely to impact your long-term wealth.