Can an Estate Distribute Stocks Without Selling? (w/Examples) + FAQs

Yes, an estate can absolutely distribute stocks directly to beneficiaries without selling them first. This process, known as an “in-kind distribution,” is not just possible; it is a common and often financially brilliant strategy for transferring wealth. The core conflict arises from a powerful federal tax rule, Internal Revenue Code § 1014, which can erase decades of taxable gains on inherited stocks. This creates a tension between an executor’s duty to settle an estate efficiently and the beneficiaries’ desire to maximize their inheritance by making smart tax decisions.

The financial impact of this choice is enormous; in 2021, it was estimated that this specific tax rule, known as the “step-up in basis,” allowed heirs to avoid taxes on over $40 billion in unrealized capital gains. Understanding how to navigate this process correctly can be the difference between a smooth, tax-efficient inheritance and a costly, complicated ordeal.

Here is what you will learn:

💰 Unlock a “Magic” Tax Eraser: Discover how the “step-up in basis” rule works to legally wipe out capital gains taxes on inherited stocks, potentially saving you thousands.
📜 Master the Executor’s Playbook: Get a step-by-step guide on the legal process for transferring shares, from getting court permission to coordinating with brokerages.
🤔 Navigate the Beneficiary’s Crossroads: Learn a clear framework for deciding whether you should keep the inherited stocks or sell them for cash, and the pros and cons of each choice.
👨‍👩‍👧‍👦 Solve the “Fairness” Puzzle: Understand the critical difference between “pro-rata” and “non-pro-rata” distributions and how to divide assets equally without causing family fights or triggering unexpected taxes.
🚫 Dodge Common Financial Landmines: Identify the biggest mistakes executors and beneficiaries make, from conflicts of interest to mishandling complex assets like retirement accounts.

Deconstructing the Inheritance Puzzle: The Key Players and Pieces

What Exactly is an “In-Kind” Distribution?

An in-kind distribution is simply the transfer of an asset in its current form instead of converting it to cash. Think of it like inheriting your grandfather’s classic car. The estate could sell the car and give you the cash, or it could transfer the car’s title directly to you—that’s an in-kind distribution.

In the world of finance, this means the executor moves shares of stock, bonds, or mutual funds from the estate’s account directly into an account owned by the beneficiary. The beneficiary receives the actual shares of Apple or Ford, not the cash equivalent. This method is a cornerstone of modern estate settlement, preserving the specific assets and their future potential.

Who’s Who in the Estate Process?

Settling an estate involves several key roles, each with distinct responsibilities. Understanding who does what is the first step to a smooth process.

The Decedent: This is the legal term for the person who has passed away. Their wishes, usually outlined in a will, guide the entire process.
The Executor (or Personal Representative): Named in the will and approved by the court, this person is the legal manager of the estate. They have a fiduciary duty, the highest legal standard of care, to act in the best interest of the estate and its beneficiaries. Their job includes gathering assets, paying debts, and distributing what’s left.
The Beneficiary (or Heir): This is the person or organization entitled to receive assets from the estate. While they don’t manage the process, they have legal rights, including the right to be kept informed by the executor.
The Trustee: If the stocks are held in a trust instead of a will, a trustee is in charge. Like an executor, a trustee has a fiduciary duty, but they follow the rules of the trust document and typically operate outside of the court-supervised probate process.
The Probate Court: This is the court system that oversees the settlement of an estate when there is a will (a process called probate). The court validates the will, officially appoints the executor, and gives the final approval for the distribution of assets.

The Legal Blueprint: Wills, Trusts, and Court Orders

The transfer of stocks is not a simple handshake; it is governed by specific legal documents that act as a blueprint for the executor.

The Will: This is the primary document stating the decedent’s wishes for how their property should be distributed after death. To have legal effect, it must be filed with and validated by the probate court.
A Trust: This is a private legal arrangement where assets are held and managed by a trustee for the benefit of others. If stocks are in a trust, they can often be distributed to beneficiaries much faster and without court involvement, a key advantage over a will.
Letters Testamentary: This is not a letter but a formal court document that serves as the executor’s official proof of authority. Brokerage firms and other financial institutions will demand to see this document before they will allow the executor to access or transfer the decedent’s accounts.

The Magic Tax Eraser: How “Step-Up in Basis” Wipes Out Decades of Gains

The single most important reason to consider an in-kind stock distribution is a powerful tax rule found in Internal Revenue Code § 1014. This rule, known as the “step-up in basis,” can completely eliminate the capital gains tax on all the appreciation an asset has earned during the decedent’s lifetime. It is the financial cornerstone of inheriting appreciated assets like stocks.

First, What Are “Cost Basis” and “Capital Gains”?

To understand the magic, you first need to know the basics of how investments are taxed.

Cost Basis: This is essentially the original purchase price of an asset. If you buy 100 shares of a stock for $1,000, your cost basis is $1,000.
Capital Gain: This is the profit you make when you sell an asset. It’s the sale price minus the cost basis. If you sell those 100 shares for $15,000, your capital gain is $14,000 ($15,000 – $1,000). You only pay tax on the $14,000 gain, not the full $15,000.

The tax rate on that gain depends on how long you held the asset. A short-term capital gain (held one year or less) is taxed at your regular income tax rate, which can be high. A long-term capital gain (held more than one year) is taxed at lower, preferential rates of 0%, 15%, or 20% for most people.

How the “Step-Up” Rule Changes Everything for Heirs

When you inherit stock, the IRS allows you to “step up” the cost basis from the original purchase price to the stock’s fair market value on the date the person died. This means all the capital gains that built up over the years are legally forgiven for tax purposes.

Let’s look at an example:

Your father bought 100 shares of stock for $10,000 many years ago. This was his original cost basis.
On the day he passes away, those same shares are now worth $150,000.
You inherit the shares. Because of the step-up in basis, your new cost basis is no longer $10,000. Your basis is “stepped up” to $150,000.
If you sell all the shares the very next day for $150,000, your taxable capital gain is $0. The $140,000 of appreciation that occurred during your father’s life is never taxed.

Furthermore, all inherited assets are automatically considered to have a long-term holding period. This means even if the stock appreciates further after you inherit it, any gain you realize will be taxed at the lower long-term capital gains rates when you sell. This provides a golden opportunity to restructure an inherited portfolio with little to no immediate tax hit.

Why Inheriting Is Better Than Gifting for Appreciated Stocks

The power of the step-up rule becomes crystal clear when you compare it to receiving stock as a gift while the person is still alive. When you receive a gift, you do not get a step-up. Instead, you get a “carryover basis,” meaning you inherit the original owner’s cost basis.

This distinction has massive tax consequences and is why financial advisors often recommend holding appreciated assets until death.

Comparison	Gifting Stock (While Alive)	Inheriting Stock (After Death)
Parent’s Original Cost	$10,000	$10,000
Value at Time of Transfer	$150,000	$150,000
Child’s Cost Basis	$10,000 (Carryover Basis)	$150,000 (Stepped-Up Basis)
If Child Sells for $150,000	Child has a $140,000 taxable gain	Child has a $0 taxable gain
Estimated Tax Owed	Potentially $21,000 or more	$0

Export to Sheets

The Executor’s Playbook: A Step-by-Step Guide to Transferring Shares

For an executor, transferring stocks is a formal process that demands precision, communication, and a deep respect for their legal duties. This is not a casual task; it is a legal mandate with real consequences if handled improperly. The executor’s authority is granted by the court, and they are accountable to both the court and the beneficiaries for every action they take.

Your North Star: The Fiduciary Duty

The executor’s guiding principle is their fiduciary duty. This is a legal obligation to act with undivided loyalty and good faith, solely in the best interests of the estate and its beneficiaries. It means putting the estate’s welfare above their own personal interests, managing assets prudently, and treating all beneficiaries impartially.

Any deviation from this duty, or even the appearance of a conflict of interest, can lead to personal liability and legal challenges from beneficiaries. For example, an executor cannot sell estate assets to themselves at a discount or hire their own company for services without full transparency and approval.

The Legal Gauntlet: Navigating the Probate Process for Stock Transfers

Probate is the court-supervised journey of settling an estate. Transferring stocks requires navigating this process step-by-step.

Step 1: Get Your Legal Authority The process begins by filing the decedent’s will with the local probate court. The court will then formally appoint you as the executor and issue a document called Letters Testamentary. This document is your golden ticket; it’s the certified proof you need to show banks and brokerage firms that you have the legal right to manage the decedent’s accounts.

Step 2: Create an Estate “Operating Account” You must apply to the IRS for an Employer Identification Number (EIN) for the estate. This number acts like a Social Security number for the estate itself. With the EIN and your Letters Testamentary, you will open a new brokerage account titled in the name of the estate (e.g., “Estate of John Smith”). All of the decedent’s stocks and other securities will be consolidated into this central estate account.

Step 3: Inventory and Value Every Single Share Your next duty is to create a detailed inventory of all estate assets, including every stock, bond, and mutual fund. Crucially, you must determine the fair market value of each security as of the date of the decedent’s death. This date-of-death valuation is what establishes the “stepped-up” basis for tax purposes and ensures that distributions are divided fairly.

Step 4: Pay All Debts, Expenses, and Taxes First This is a non-negotiable step. Before a single share can be transferred to a beneficiary, you must pay all of the estate’s legitimate debts, final expenses, and taxes. This includes everything from credit card bills and medical expenses to the decedent’s final income tax return (Form 1040) and the estate’s income tax return (Form 1041). If the estate doesn’t have enough cash to cover these liabilities, you may be forced to sell some of the stocks, even if the beneficiaries wanted them in-kind.

Step 5: Ask the Court for Permission to Distribute Once all obligations are paid, you will file a Final Account and Petition for Distribution with the probate court. This document is a complete report of your activities: what you collected, what you paid out, and your detailed plan for distributing the remaining assets. The petition must be specific, stating exactly which assets and how many shares each beneficiary will receive.

Step 6: Get the Court’s Blessing (The Final Order) The court will review your petition. Assuming everything is in order and no one objects, the judge will sign an order approving your plan. This Judgment of Final Distribution is your legal green light to finally transfer the stocks to the beneficiaries.

Step 7: Execute the In-Kind Transfer Now you can put the plan into action. You will need to coordinate with both the estate’s brokerage firm and the beneficiaries.

Prepare a Letter of Instruction: This is a formal letter you send to the brokerage firm holding the estate’s account. It must clearly authorize the transfer and include specific details.
Beneficiaries Open Accounts: Each beneficiary must have their own brokerage account ready to receive the shares. To make the process smoother and faster, it is highly recommended that beneficiaries open their new accounts at the same brokerage firm where the estate account is held. This allows for a simple internal transfer instead of a more complex cross-firm (ACAT) transfer.
Provide All Necessary Documents: You will give the brokerage firm a copy of the death certificate, your Letters Testamentary, the court’s final order, and the Letter of Instruction. You will also need the account numbers for each beneficiary’s receiving account.

Step 8: Get a Receipt and Close the Case After the transfers are complete, your job is not quite done. You must get a signed receipt from every beneficiary acknowledging they have received their inheritance. You file these receipts with the court as proof that you have fulfilled your duties. Only then can you petition the court for a final discharge, which officially releases you from your responsibilities and personal liability.

The Beneficiary’s Crossroads: Keep the Stocks or Take the Cash?

Receiving an inheritance of stock is a major financial event that requires careful thought, not quick decisions. Thanks to the step-up in basis, you often have the freedom to choose what to do with the portfolio based on your own goals, not just tax avoidance. This is a moment to pause, plan, and take control of your financial future.

Know Your Rights as an Heir

As a beneficiary, you are not a passive bystander. You have legal rights that ensure the process is fair and transparent.

Right to Be Notified: The executor must inform you that you are a beneficiary of the will.
Right to Be Informed: You have the right to ask the executor reasonable questions and be kept updated on the status of the estate’s administration.
Right to an Accounting: You are entitled to receive a formal accounting from the executor, which is a detailed report of all the estate’s financial transactions, unless you waive this right in writing.
Right to a Timely Distribution: While probate takes time, you have a right to receive your inheritance in a reasonable timeframe after all debts and taxes are paid.

The Big Decision: A Framework for Choosing

Should you take the stocks as they are, or ask the executor to sell them and give you the cash? There is no single right answer, but here is a framework to help you decide.

Pros of Keeping the Stocks (In-Kind)	Cons of Keeping the Stocks (In-Kind)
Preserves Growth Potential: You can continue to benefit if the stocks appreciate further.	Inherits Existing Risk: The portfolio may be poorly diversified or concentrated in risky stocks.
Avoids Selling in a Down Market: You are not forced to lock in losses if the market is low when you inherit.	Requires Active Management: You become responsible for monitoring and managing a portfolio you didn’t choose.
Maintains a Legacy: You can hold onto stocks that have sentimental value or were important to your loved one.	May Not Align with Your Goals: The inherited stocks might not fit your personal investment strategy or risk tolerance.
Defers Capital Gains Tax: You pay no tax until you decide to sell, allowing for tax-deferred growth.	Can Be Complex: Managing individual stocks can be more complicated than holding a few simple index funds.

Top 5 Mistakes Beneficiaries Make (And How to Avoid Them)

Receiving a sudden inheritance can be overwhelming. Many people make predictable mistakes during this emotional time.

Making Rash Decisions: The biggest mistake is acting too quickly. Do not immediately buy a new car, pay off your mortgage, or quit your job. Park the inheritance in a safe place, like a high-yield savings account, and give yourself at least six months to think and plan.
Treating it Like “Found Money”: Viewing an inheritance as a lottery win often leads to frivolous spending. Instead, think of it as a transfer of responsibility—a capital base that, managed wisely, can provide long-term security.
Ignoring the Portfolio’s Quality: Just because your loved one owned these stocks doesn’t mean they are good investments for you. It’s common to inherit a messy collection of “15 random stocks and 2 funds with expensive ratios.” Don’t let sentimentality stop you from cleaning up a poorly constructed portfolio.
Forgetting About Retirement Accounts: The tax rules for inherited IRAs and 401(k)s are completely different. These accounts do not receive a step-up in basis, and distributions are typically taxed as ordinary income. You are generally required to withdraw all funds within 10 years, so a specific strategy is needed.
Going It Alone: For any significant inheritance, professional guidance is crucial. A fee-only financial advisor can provide objective advice on investment strategy, while a CPA can help you navigate the tax implications and avoid costly errors.

Navigating the Nuances: Three Common Inheritance Scenarios

Every estate is different. The right way to distribute stocks depends on the family structure, the types of assets involved, and the specific wishes of the decedent. Here are three common scenarios that illustrate the different paths an inheritance can take.

Scenario 1: The Sole Heir

The Situation: Sarah is the only child and sole beneficiary of her mother’s estate. The estate consists of a brokerage account with a well-diversified portfolio of stocks and ETFs. The will is straightforward, and there are no complex debts.
The Process: This is the simplest scenario. The executor (who might even be Sarah herself) goes through the standard probate process. After paying final expenses, the executor can transfer all the stocks, in-kind, directly to a brokerage account in Sarah’s name.
The Outcome: Sarah receives the entire portfolio with a full step-up in basis. She can immediately sell any or all of the stocks with little to no capital gains tax. This gives her a clean slate to reinvest the proceeds into a portfolio that matches her own financial goals.

Action	Financial Outcome for Sarah
Executor transfers all stocks to Sarah’s account.	Sarah owns the portfolio directly.
Sarah sells the entire portfolio a week later.	Because of the step-up in basis, her taxable gain is near zero.
Sarah reinvests the cash into a simple three-fund portfolio.	She now has a portfolio tailored to her goals with no tax drag from the past.

Export to Sheets

Scenario 2: The Sibling Split and the Family Home

The Situation: A father passes away, leaving his estate to his three children in equal shares. The estate includes the family home (worth $600,000) and a stock portfolio (worth $1.2 million). One child, Michael, wants to keep the house, while the other two, Lisa and Tom, prefer cash.
The Problem: If the assets are split pro-rata, each child gets a 1/3 ownership in the house and 1/3 of the stocks. For Michael to own the house, he would have to buy out his siblings’ shares. This sibling-to-sibling transaction is not protected by the parent-child exclusion and could trigger a massive property tax reassessment.
The Solution: The will or trust should grant the executor or trustee the power to make a non-pro-rata distribution. This allows the executor to give assets of equal value to the heirs, not necessarily a piece of every asset. Michael receives the $600,000 house, while Lisa and Tom each receive $600,000 worth of stock from the portfolio.

Distribution Method	Tax & Financial Outcome
Pro-Rata Distribution: Each child gets 1/3 of the house. Michael then buys out his siblings.	The buyout triggers a property tax reassessment. Michael’s annual property tax bill could double or triple.
Non-Pro-Rata Distribution: Michael gets the house; Lisa and Tom get stocks of equal value.	The parent-child transfer is protected. Michael keeps the low, locked-in property tax basis, saving thousands per year.

Scenario 3: The Protective Trust

The Situation: A grandmother wants to leave a significant stock portfolio to her 22-year-old grandson, but worries he is not financially mature enough to handle a large lump sum.
The Problem: A direct inheritance through a will would give him unrestricted access to the entire portfolio once probate is complete. This could lead to irresponsible spending and rapid depletion of the inheritance.
The Solution: Instead of a will, the grandmother places the stocks in a trust. The trust document names a trustee to manage the investments and outlines specific rules for distribution. For example, the grandson might receive income from dividends quarterly, with lump-sum distributions of the principal at ages 25, 30, and 35.

Asset Location	Distribution Process & Control
In a Will (Probate Estate): Stocks are distributed directly to the grandson after probate.	Public, court-supervised process. Once complete, the grandson has full, immediate control of all assets.
In a Trust: Stocks are managed by a trustee according to the trust’s rules.	Private process, no court involvement needed for distribution. The grandson receives funds over time, protecting the assets from mismanagement.

State Law Nuances: Why Geography Matters

While federal tax law, specifically the step-up in basis rule, provides the foundation for inheriting stocks, the actual mechanics of estate administration are governed by state law. Probate rules can vary significantly from one state to another, affecting an executor’s power and the default methods for distribution.

The Default Rules: In-Kind vs. Cash

Some states have laws that express a preference for how assets should be distributed if the will is silent on the matter.

Florida: The law states a preference for in-kind distribution “to the extent possible.” An executor can satisfy a cash bequest with property (like stock) as long as the beneficiary hasn’t demanded cash and other heirs don’t object.
New Jersey: Similar to Florida, New Jersey law says distributable assets “shall be distributed in kind to the extent reasonably possible” unless the will says otherwise.
Ohio: The law gives the executor broad discretion to “distribute… in cash or in kind.” However, it also includes detailed rules about the executor’s personal liability if they distribute assets too early before all potential creditor claims are settled.
Utah: The Uniform Probate Code, as adopted in Utah, requires the executor to provide a formal “deed of distribution” to the beneficiary as legal evidence of their new title to the in-kind asset.

The Power to Divide: Pro-Rata vs. Non-Pro-Rata

The flexibility to make non-pro-rata distributions is often explicitly granted by state law, which can be a powerful tool for avoiding conflicts and bad tax outcomes.

Texas: The Estates Code grants an independent executor the authority to allocate assets in “proportionate or disproportionate shares” and to adjust for differences in valuation, unless the will forbids it.
California: The Probate Code gives a trustee the power to make distributions in “divided or undivided interests” and to make them “pro rata or non pro rata.” This is the legal foundation for the tax-saving strategy seen in the family home scenario.

The Community Property Advantage: A “Double Step-Up”

In nine states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin—a special rule applies to married couples. These are community property states, where most assets acquired during the marriage are considered owned 50/50 by both spouses.

When one spouse dies, not only does the deceased spouse’s 50% share get a step-up in basis, but the surviving spouse’s 50% share also gets a step-up. This “double step-up” does not happen in separate property states, where the surviving spouse retains their original cost basis on their half of a jointly owned asset. This can result in significant additional tax savings for the surviving spouse in a community property state.

Do’s and Don’ts for a Smooth Inheritance

For Executors: Your Fiduciary Checklist

Do’s	Don’ts
✅ Over-Communicate: Keep all beneficiaries informed about your progress, timelines, and decisions. Transparency builds trust and prevents suspicion.	❌ Don’t Self-Deal: Never buy assets from the estate or hire your own business without full disclosure, independent appraisals, and beneficiary or court approval.
✅ Document Everything: Keep meticulous records of every transaction, communication, and decision. This is your best defense if your actions are ever questioned.	❌ Don’t Distribute Early: Never distribute assets to beneficiaries until all debts, taxes, and administrative expenses have been fully paid and accounted for.
✅ Get Professional Help: Hire an estate attorney and a CPA. Their fees are a legitimate estate expense and can save you from making costly legal and tax mistakes.	❌ Don’t Mix Funds: Keep estate assets completely separate from your own personal funds. Open a dedicated bank account for the estate.
✅ Act Impartially: Your duty is to all beneficiaries equally. You cannot favor one beneficiary (or yourself, if you are also a beneficiary) over another.	❌ Don’t Drag Your Feet: While the process takes time, you have a duty to settle the estate in a timely manner. Unreasonable delays can be grounds for your removal.
✅ Follow the Law and the Will: Adhere strictly to the terms of the will and the laws of your state. Do not substitute your own judgment for what the decedent wanted.	❌ Don’t Ignore Beneficiary Questions: You have a duty to respond to reasonable inquiries from beneficiaries. Ignoring them creates mistrust and can lead to legal action.

For Beneficiaries: Your Inheritance Game Plan

Do’s	Don’ts
✅ Be Patient: The probate process is slow and can easily take a year or more. Understand that the executor has many legal steps to complete before they can distribute anything.	❌ Don’t Make Sudden Life Changes: Resist the urge to immediately quit your job, buy a boat, or make other large financial commitments. Give yourself time to adjust and plan.
✅ Ask Questions Respectfully: You have a right to be informed. Communicate with the executor to understand the status of the estate, but be mindful that they are managing a complex process.	❌ Don’t Assume the Investments are Good: Do not hold onto inherited stocks out of pure sentimentality. The portfolio may be poorly constructed and unsuitable for your goals.
✅ Seek Your Own Advice: Hire your own fee-only financial advisor and CPA to get objective advice tailored to your specific situation, not the estate’s.	❌ Don’t Forget About Taxes: While the inheritance itself isn’t income, you will owe capital gains tax when you sell appreciated assets. Understand the rules for the step-up in basis.
✅ Create a Plan: Before you receive the assets, think about your goals. Do you need liquidity? Are you saving for retirement? Having a plan will help you make smart decisions.	❌ Don’t Ignore Inherited IRAs: The rules for inherited retirement accounts are very different and strict. You must understand the 10-year withdrawal rule to avoid penalties.
✅ Review Your Own Estate Plan: A significant inheritance changes your own financial picture. Update your will, trusts, and beneficiary designations to reflect your new net worth.	❌ Don’t Cause Unnecessary Family Drama: Disagreements are common, but try to work constructively with the executor and other beneficiaries. Legal battles are costly and emotionally draining for everyone.

Frequently Asked Questions (FAQs)

1. Do I have to pay income tax on inherited stocks when I receive them? No. The act of inheriting stock is not considered taxable income. You only pay capital gains tax when you eventually sell the stock for a profit.

2. Are gains on inherited stock taxed as short-term or long-term? Yes. They are automatically treated as long-term. This is a major benefit, ensuring any gains are taxed at lower rates, regardless of how long you or the decedent held the stock.

3. What if the stock’s value drops after the date of death? No. Your tax basis remains the higher value from the date of death. If you sell at the lower price, you can claim a capital loss, which can offset other investment gains.

4. Can an executor refuse my request to receive stocks in-kind? Yes. The executor has a fiduciary duty to the entire estate. If selling the stock is necessary to pay debts or is fairer to other beneficiaries, they can override your preference.

5. How is the value of inherited stock determined for tax purposes? No. The value is its fair market value on the date the original owner died. This “stepped-up” basis is used to calculate your future capital gains tax when you sell.

6. What is the difference between inheriting from a will versus a trust? Yes. A will goes through a public court process called probate. A trust is administered privately by a trustee, which is typically much faster and avoids court involvement for asset distribution.

7. What if the estate has more debts than assets? No. If an estate is insolvent, all assets must be sold to pay creditors in a specific legal order. Beneficiaries will receive nothing, and an in-kind distribution is not possible.

8. How are stocks split between multiple beneficiaries? Yes. It can be done “pro-rata,” where everyone gets an equal piece of every stock, or “non-pro-rata,” where heirs get assets of equal total value but not necessarily a piece of everything.

9. What if I inherit stock from a foreign country? Yes. You must report a foreign inheritance over $100,000 to the IRS on Form 3520. The U.S. step-up in basis rule may not be recognized in the other country, creating complex tax issues.

10. Can a minor child inherit stocks directly? No. A minor cannot legally own stock. The shares must be managed by an adult in a custodial account (UTMA/UGMA) or, more preferably, within a trust created for the minor’s benefit.

Related reading