Saturday, October 15, 2022

What Banks Offer Custodial Accounts

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Td Bank Simple Savings

Custodial Bank Accounts are Who’s Assets?

TD Banks childrens savings accounts are really just an everyday savings account but they waive the monthly maintenance fee and minimum daily balance requirements for savers aged 18 or younger. Other perks include free automatic transfers from other accounts and earned interest on the savings account.

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Two Types Of Custodial Accounts

Custodial accounts come in two basic varieties: the Uniform Transfers to Minors Act accounts and the older Uniform Gift to Minors Act accounts. Their main distinction lies in the kind of assets you can contribute to them.

UTMA accounts can hold virtually any kind of asset, including real estate, intellectual property, and works of art. UGMA accounts are limited to financial assets of cash, securitiesstocks, bonds, or mutual fundsannuities, and insurance policies. All U.S. states allow UGMA accounts. However, South Carolina does not allow UTMA accounts.

Both UTMA and the older version UGMA have custodial accounts set up in the minor’s name, with a designated custodianusually the child’s parent or guardian. Initial investments, minimum account balances, and interest rates vary by the company that houses the account.

There are two types of custodial accounts: the Uniform Transfers to Minors Act and the Uniform Gift to Minors Act The UTMA is allowed in all states except South Carolina, while the UGMA is allowed in all 50 states.

Watch Now: What Is the Uniform Gifts to Minors Act?

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Best For Teaching Kids About Investing: Stockpile


Stockpile is a unique investment firm that allows you to buy fractional shares of stock starting at $5 invested. Accounts are free and all trades charge a simple 99 cent fee. Stockpile is fun to use, offers a useful mobile app, and allows anyone to gift shares of stock to an account holder through a stockpile gift card.

If you open a UTMA custodial account for your child at Stockpile, other family members may want to contribute. Its easier at Stockpile than other brokers. They can hop on the Stockpile website and choose one of 1,000 stocks and ETFs with an e-gift card, print-at-home gift card, or mailed gift card. Once redeemed, the shares show up in your minors account the same way they’d show up if you had invested yourself.

How A Custodial Account Works

Best Custodial Accounts in 2021

Once established, a custodial account functions like any other account at a bank or brokerage. The custodiana designated manager or investment advisordecides how to invest the money. The account manageror other entitiescan continue to contribute to the fund.

As noted above, custodial accounts can invest in a variety of assets. However, the financial institution probably won’t allow the manager to use the account to trade on margin or buy futures, derivatives, or other highly speculative investments.

Once the minor reaches the legal age of adulthood in their state, control of the account officially transfers from the custodian to the named beneficiary, at which point they claim full control and use of the funds. Should the minor die before reaching majority, the account will become part of the child’s estate.

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Best Robo Advisor: Acorns

Acorns is our pick for the best Robo advisor because of its easy-to-set-up custodial accounts, breadth of helpful educational resources, and access to family financial advice.

  • Access to a full-financial wellness system

  • Easy to set up custodial accounts

  • Flat fee can be high for small account balances

Acorns was launched in August 2014 with the goal of making investing accessible to everyone. Today, Acorns served over nine million users. We chose Acorns as the best Robo Advisor for custodial accounts because of the Acorns Early investing feature for kids. A UTMA or UGMA account can be opened for a minor in under three minutes.

Early is built into the larger Acorns platform which offers a full financial wellness system. You can set up custodial accounts for your kids, personal investment accounts for yourself, as well as retirement accounts, and checking accounts all for a flat fee of $5 per month. There is no account minimum for Early.

Can A Parent Close A Custodial Account

You can close a custodial account and suffer no repercussions if you give the funds to the child or transfer them into another account for the child’s benefit. … You can close the custodial account and establish a regular account at your bank or brokerage firm with the child as the sole beneficiary.

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Vanguard 529 College Savings Plan

Low-Cost Investment Account for Future Education Expenses

The Vanguard 529 College Savings Plan is a Nevada 529 plan available to families in all 50 states.

Although the Vanguard 529 College Savings Plan is unlike many 529 plans in that it doesnt offer a special state income tax deduction for in-state families chiefly because Nevada doesnt have a state income tax it does offer a key tax advantage common to all 529 plans: namely, investment income that grows tax-free.

No matter where you live or plan to send your kid to college, you never have to worry about paying state or federal income tax on qualifying withdrawals from this account.

Tax benefits arent the only selling points of the Vanguard 529 plan. With generous lifetime contribution limits and the low investment fees Vanguard investors expect from the money management giant, this product is appropriate for anyone who doesnt want to pay more than they should to build an education nest egg for their kids.

How Do Custodial Accounts Work

Automatically avoiding the print of empty statements for closed accounts for a Global Custodian Bank

How a custodial account will work will depend on the type of account you open. As weve mentioned, not all custodial accounts are created equal. A Coverdell ESA is an alternative to other education savings plans like 529 college savings plans, and it has some helpful tax benefits. Any money that your investment earns within the account will be tax-deferred. Furthermore, any withdrawals you make for education expenses will be tax-free. Keep in mind, however, that you need to use the money on education expenses in order to get these tax benefits.

Coverdell ESAs also have a few limitations that can complicate things. First, these accounts are only available to individuals and families under a certain income level. Also, you can only contribute a maximum of $2,000 per year to your ESA. That said, you can get around this limit by setting up multiple ESAs for the same beneficiary if you wish.

Another category of custodial accounts are the Uniform Transfer to Minors Act account and the Uniform Gift to Minors Act account.

You can also open a UGMA account if you wish. This account gives you a lot of flexibility regarding what youre giving the beneficiary. You can deposit money, savings bonds, stocks, annuities and even life insurance. The most important thing to consider with a UGMA account is that creating the account is irrevocable. Once you put the funds in the account, you can only spend it if its explicitly for the minors benefit.

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Top 10 Childrens Savings Accounts Of 2021

  • Banks Editorial Team

Childrens savings accounts are a great way to instill smart money habits early on to make sure our kids grow into financially responsible adults. Some of the best gifts and lessons parents can give to their children are money management skills, financial responsibility, and the importance of a savings culture. Teaching and demonstrating this value to your kid at a young age through a savings account is one of the best ways to impart this knowledge. But how do you determine the best among the bunch?

We have scoured through dozens of childrens savings accounts on offer from reputable banking institutions and selected the top ten based on their bonuses, annual percentage yield *, financial education tools on offer, monthly fees, and minimum deposit requirements. Instilling the habit of saving money can help children avoid a lot of grief later in life. A good age to start teaching a child about money is between 6 and 8.

*Since APY rates are variable andchange based on the economy/market we are not listing them here. Please referto the financial institutions website to get the most current APY rateinformation.

Best For Custodial Bank Accounts: Ally Bank

Ally Bank

If you’re leaning towards a more conservative option to save and would rather keep the account funds in cash, consider Ally Bank. Ally offers among the best interest rates in the industry, and the Child Savings Account is a great place to put away money for college or other future needs.

Ally Bank is an online-only bank . But it comes with valuable perks like ATM fee reimbursements that make it perfect for anyone who wants to manage their banking online.

You can add to the account with online transfers, remote check deposits from your phone, or other electronic transfer methods. Thanks to the accounts FDIC insurance, you never have to worry about losing a cent. But, because it’s just a savings account, you wont get any big return on your investment either.

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What The Future May Hold

Many are starting to see the value and practicality that comes from using Bitcoin, as well as other crypto assets. So, what does this mean for the future?

Well, more than anything, this will likely serve as a revolutionary catalyst. In particular, for an acceleration of clarity from the state of Washington. It will pave the way for a much more solid regulatory framework for our industry. This, of course, is a good thing.

Keep in mind that more often than not, the clarity of what we are able and unable to do tends to fluctuate. A lot of people hope that this signifies the commencement of a trickle-down effect. Perhaps this announcement can function as a stabilizer of some sort.

But a question still remains. What will happen when we reach a point where all the headlines surrounding this announcement fade away? What will be left when the dust settles? Realistically speaking, in the short term, not a lot of new asset custodian entrants from this regulatory support. However, there is a bright spot to be found here. There is a chance that onlookers will see the governments acknowledgement that crypto is real. Or, at the very least, crypto is real enough to do business with.

What Happens To A Custodial Account When The Child Turns 18

How to Help Teenagers Start Investing Early

Once the minor reaches the legal age of adulthood in their state, control of the account officially transfers from the custodian to the named beneficiary, at which point they claim full control and use of the funds. Should the minor die before reaching majority, the account will become part of the child’s estate.

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Downsides Of Custodial Accounts

Although plenty of upside exists with custodial accounts, it’s worth remembering some of the downsides as well. These include:

  • Financial aid: Custodial accounts are considered the child’s property and assets. Minors with substantial means quickly fall off the list of students who’ll receive financial aid. Say goodbye to prospects around grants and low-cost student loans.
  • Lack of tax breaks: While custodial accounts include tax advantages, they also exclude other tax benefits. Contributions to custodial accounts don’t come with deductions when it comes time to file taxes. When a custodial account kid becomes an adult, they’ll owe taxes on any realized account gains at their regular tax rate too.
  • Irrevocable: A custodial account legally belongs to its beneficiary the child. Once they come of legal age, they get full control of it, and can use the proceeds however they wish no matter what parents intended.

All The Benefits Of Our Popular Schwab One Brokerage Account

  • Buy and sell stocks, mutual funds, ETFs, and other securities.
  • Take advantage of potential long-term growth.
  • Set aside money for your retirement, or other goals like college tuition or a down payment.
  • Gain access to investment research, tools, and strategies.
  • Account open or maintenance fees.

    Other account fees, fund expenses, and brokerage commissions may apply2

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    What Is A Custodial Ira

    If your child or the minor has earned income, using a custodial IRA might be a tax-smart way to save their earnings for retirement.

    A custodial IRA is an account set up and controlled by a custodian, usually the parents, grandparents or guardian of the minor.

    The IRA can be set up with a brokerage firm like M1 Finance and is an excellent way to start investing for your child while retaining control until they reach adulthood.

    Like other custodial accounts, custodial IRAs revert to the minor once reaching the age of majority. Minors or their family members can contribute up to $6,000 per year or their earned income, whichever is greater.

    Youd likely want to consider a custodial Roth IRA for your child when their income tax rate is likely the lowest theyll ever encounter. That way, they pay tax on the income now and it comes to them tax-free in retirement.

    That gives you multiple decades of tax-free, compounded returns. Thats every parents dream!

    Consider opening a custodial IRA with a company like M1 Finance. Opening a custodial IRA at M1 Finance for your child or grandchild could be one of the best investments you make in their future.

    Axos Bank First Checking

    How To Make Your Child A Millionaire By Age 21 (custodial accounts)

    Earn 0.10% APY and Pay No Monthly Maintenance Fees

    Axos Bank First Checking is a custodial teen checking account built for kids between the ages of 13 and 17.

    With easily customized parental controls and a digital debit card dashboard that lets parents and kids manage virtually every aspect of the banking relationship, its a great choice for on-the-go families.

    Axos Bank First Checking is great for parents who want to let the reins go slowly, rather than all at once. Axos limits cash withdrawals to $100 per day and point-of-sale transactions to $500 per day, limiting how far kids can stretch their means.

    And Axos biometric authentication protocols help keep your card and account and your kids safe from troublemakers.

    • Minimum Deposit and Balance Requirements: Theres no minimum deposit or ongoing balance requirements.
    • Account Opening Bonus: None, although targeted offers may occur from time to time.
    • Yield: 0.10% APY on all balances as of June 3, 2021.
    • Rewards and Incentives: Enjoy up to $12 in domestic ATM fee reimbursements per month.
    • Possible Fees: There are no monthly maintenance fees, overdraft fees, or nonsufficient funds fees. Other fees may apply.

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    Best For College Savings: Td Ameritrade

    TD Ameritrade

    TD Ameritrade offers three solid options to save for college, one of which is a UGMA/UTMA custodial account. This account is available to open with no minimum balance. TD Ameritrade categorizes its custodial account as an education savings vehicle for marketing purposes, but you are not restricted to use the funds for college.

    TD Ameritrade came from a merger of two of the biggest financial companies in North America, so it offers a wide range of services to complement a custodial account. Trades cost $6.95 each, which puts them in the discount brokerage category but not the lowest cost around.

    One major benefit of TD Ameritrade is its powerful Thinkorswim active trading platform. If you want high-tech trading that looks like something a Wall Street trader uses, youll be thrilled with the advanced trading options in Thinkorswim.

    Want more information? Read through our full review of TD Ameritrade.

    Will My Childs Financial Aid Be Affected By A Custodial Account

    Because any assets held in a custodial brokerage account are legally your childs, they weigh more heavily in the Free Application for Federal Student Aid calculations. Funds held in 529 accounts are considered less heavily. Keep in mind, though, that even money in a childs savings or checking account is weighed more heavily than funds in a 529 plan.

    Investing involves risk including loss of principal. This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

    John Schmidt is a staff writer for Acorns and Grow. He likes helping the up-and-coming make good money moves because its the closest hell ever get to being Cardi B. His work has also appeared in MarketWatch and The Financial Diet.

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