Important Things to Know About Custodial Accounts

For parents who want to start saving for their kid’s future can open a custodial account for them. These are a type of brokerage accounts that is meant for kids. However, it can be opened by an adult as a custodian.

A custodian account comes with certain tax and investing benefits. Once you open a custodial account, you can invest in bonds, stocks, cash, and other market securities on behalf of your kids.

If you are planning to open a custodial account for your child, you should opt for a custodial account Robinhood. But before that, there are certain things you should know.

Things To Know About Custodial Accounts

Here is some important information to know about custodial accounts. If you are planning to open up one for your kid, you should read through pointers.

1.     It Can Be Opened By An Adult

Many of you may assume that a custodial account can be opened only by the parents of a child. However, that is not the case. It can be opened by an adult as a custodian. It can be parents, uncle, aunt, grandparents, or any other adult. As a custodian, you can manage the account on your kid’s behalf.

2.     A Custodian Has The Rights To Withdraw Cash From The Account Anytime

As a custodian to your child, you can take out money from their account any time you want. However, you can spend the withdrawn money only on something that will benefit your child. For more details, you should go through Section 14(a) of the Uniform Transfers to Minors Act.

3.     The Money Is No More Yours

A custodian may have the rights to manage the account and invest money in it, but all the funds transferred to the account belong to your child. In other words, the funds no longer yours. Even if you withdraw the money from the account, you will have to use it for the benefit of your child.

4.     A Custodial Account Is Subjected To Taxes

A custodian is allowed to put up to $15,000 into the account per year. The amount is $30,000 for married couples. The gift tax is basically a federal tax charged on a transfer when it exceeds the mentioned amounts. Before you open a custodial account, it would be better if you consult a professional tax advisor.

Opening a custodial account can be beneficial for your kid in the future. It’s a good way of saving money for your child.


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