Custodial account

Plan for a child's future by saving and investing on their behalf.


What is a custodial account?

A Fidelity custodial account, sometimes called a UTMA/UGMA account, is a brokerage account for investing in stocks, bonds, mutual funds, and more. It can be a great way to save on the child's behalf, or to give a financial gift. The money in this account belongs to the child.

How to decide if this account is right for you

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This custodial account is:

 
  • Considered the minor's asset
  • Transferred to the minor at a certain age (between 18–25)
  • Funded with after-tax money (or by transferring shares), though there are tax benefits
  • A brokerage account for investing
  • Factored into financial aid eligibility
  • A way to directly transfer wealth
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Other accounts to consider:

 
  • For saving for education with special tax benefits, consider a 529 account
  • For getting an early start on the child's retirement savings, consider a Roth IRA for Kids
  • For educating your teen about saving, spending and investing, consider a Fidelity Youth Account
  • For greater flexibility transferring money at an age you choose (generally up to 35), consider a trust through our Personal Trust Services

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Custodial account FAQs

  • What's the difference between a custodial account and a trust?
    Trusts are typically more complex than custodial accounts and may require the help of an attorney. With a custodial account, you can easily open one yourself through a quick online process. While both options allow you to protect assets for a child, a custodial account’s assets must be transferred to the child at a certain age, while a trust allows you greater flexibility in defining the terms of the transfer to the child.
  • Who controls a custodial account?
    Money in the account belongs to the child, with the adult acting as custodian until the child reaches a certain age (between 18 and 25, depending on the state), at which point the assets must be transferred to the child. Until the account is transferred, the custodian controls all investment decisions but may not change the child the account was established for. Withdrawals can be made at any time by the custodian, but they must be for the benefit of the child.
  • Who can contribute to a custodial account and are there limits?
    Anyone can contribute to a custodial account—parents, grandparents, friends, other family—with no contribution limits, making them valuable gift opportunities for major milestones and celebrations. Individuals can contribute up to $16,000 free of gift tax in 2022 ($32,000 for a married couple). There's also no minimum to open an account, though certain investments may require a minimum initial investment.
  • What are the tax benefits of a custodial account?
    A portion of any custodial account earnings (up to $1,100) may be exempt from federal income tax. Additionally, for earnings that exceed the exemption amount, another $1,100 may be taxed at the child's tax rate, which is generally lower than the parent's tax rate. Up to $16,000 per individual ($32,000 for a married couple) can be contributed free of gift tax in 2022. (Note: Contributions to a custodial account are not tax deductible.)
  • What are the investment choices for a custodial account?
    Custodians have access to our full range of investments, including stocks, options, mutual funds, bonds, CDs, and fractional shares. (Note: The child the account was established for cannot invest in the account until the account is transferred to them.)
  • When can a custodian make withdrawals?
    Withdrawals can be made at any time by the custodian, but they must be for the benefit of the child.
  • Will the child be able to view the custodial account prior to transfer?
    The child will only be able to view custodial account information if a Fidelity Youth Account (available only to teens age 1317) is also opened under their name. Keep in mind: Even if the child has viewing capability, they will not be able to transact or make changes to the custodial account.
  • When does the custodian need to transfer the account to the child?
    The custodian must transfer the account to the child within an allotted period of time once the child reaches a certain age (between 18 and 25, depending on the state). The custodian will be notified by Fidelity when the transfer needs to be initiated.
  • Does the custodian have any control over the account after it's transferred to the child?
    Once the account and its assets are transferred, a new account is opened with the child (now a legal adult) named as the owner. The child has complete control over the new account and the transferred assets, including the ability to sell any investment or close the account and request a check for the proceeds. Alternatively, the child could choose to establish the custodian as a joint account holder or grant the custodian power of attorney on the account.
  • How can a custodial account be used to help educate a child about saving and investing?
    With a custodial account, you can explain that the money belongs to the child and that you, as the custodian, are saving and investing for them until they reach adulthood. By showing a child the investment mix, types of assets, and performance reports, you can educate them about investing until the account becomes theirs.

Next steps


Read more on Viewpoints


Must-know facts about UGMA/UTMA accounts.


Compare saving for a child options


Understand the differences between a 529, custodial account, Roth IRA for Kids, Youth account, and ABLE account.


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