How to set up an iPhone as a gift before activating service?

You certainly can. When setting up you will have the option to continue without an Apple Account or to create one for them. You will also be asked a few other features which you can skip and let them set up, such as Apple Wallet and Face ID.

Keep in mind that setting up an iPhone is a very personal and selective task. You will be asked ideal font sizes, any accessibility settings and more which will vary by person. If you set it up and your relative ends up wanting to change certain features, it likely will be more difficult than doing it upon setup as you are prompted to do so.

"How to set up an iPhone as a gift before activating service?: I purchased an iphone for a relative for Christmas. She has on old flip phone. Am I able to set up most of the phone prior to her activating service? She has no apple account. I purchased the phone 'to select carrier later'. I would like to get as much set up prior to giving it to her so she has the minimum to deal with getting the phone activated."

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For the note...

How to Protect an Phone:

Based on personal experience...

A. Screen Protector to Use:

Liquid Coverer: Is this covered under AppleCare? If so, don't use any liquid adhesive. If not covered under AppleCare, then what to use is Liquid Armor or Liquid Nano. Note that covering it with this would cancel any coverage whatsoever.

B. Which Case to Use:

I'm an OtterBox user. So, avoid getting a totaled phone, consider using one of those. I've droppemy iPhone so many times, and these have prevented all damages, in all the years I've used these.

I think it will be much better experience if they set it up for themselves. Setting up iphone is not a huge deal except the account setup