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What is a custodial account?

A custodial account allows a parent, guardian, or other family members/friends to open an investing account for a minor*.

The adult (or Custodian) who opens the account can manage the money and investments until the minor reaches the “age of majority.” That age is usually 18 or 21, depending on the Custodian’s state.

What happens when the child reaches the age of majority?
When the minor is old enough, money in a custodial account becomes their property.
The assets deposited into a custodial account cannot be taken back or given to someone else.

Can the money be used to help the child before they are the age of majority?
Money in a custodial account can be used by the parent or legal guardian, but only to do things that benefit the child.

Some examples of uses that benefit a child include:

  • Education (preschool, daycare etc.)
  • School uniforms
  • Activities or lessons (music classes, swimming lessons etc.)

What if I’m not sure if something counts as benefitting the child?
If you’re not sure whether something you would like to use the money for qualifies as benefitting the minor, a financial advisor can help you answer the question.

*The age of a minor varies by state. Some states consider anyone under 18 a minor. Other states consider individuals minors until they are 21.

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