Custodial accounts may be an ideal investment vehicle to use for a child’s expenses prior to or after college. While there are no requirements that the money be used for education, any withdrawals from a custodial account must be used for the child’s benefit outside the normal cost of care.
Custodial accounts are established either under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), depending on your state of residence.
Consider a Custodial Account if:
- You might want to use the money for your child’s expenses prior to or after college.
- Your child may not be applying for needs-based financial aid or you are planning to save more than $2,000 per child per year.
- You don’t mind handing over control of the account to your child when the time comes.
- You want to use your annual gift tax exclusion to gift money to your child.
Is a custodial account right for you?
Almost anyone is eligible to open a custodial account for a child, whether it's a parent, grandparent, relative or friend.
The child owns the money, but the adult (custodian) manages it until the child takes control of the assets when the child reaches adulthood.
Tax Features and Investments
Withdrawals and Helpful Information
Open a Custodial Account
Saving for your child’s future may be one of the most important investments you’ll ever make. Taking action now can help ensure your child, grandchild or dependent has a strong financial foundation for the long road ahead.
Related Content
Develop a College Investment Plan
Create a blueprint and maximize the potential to meet your college savings goal.
Coverdell Education Savings Account
A Coverdell Education Savings Account (CESA) is an account in which the child owns the money, but a parent or legal guardian manages the account.
College Planner
Use the College Planner to assess tuition and fees, room and board and other expenses for a variety of colleges and universities across the U.S.