Yes, you can open an account, but the rules depend on your grandchild's age and your legal relationship

You can open a bank account for your grandchild, but what you can actually do with it depends on whether they are a minor or an adult, and whether you have legal guardianship. If your grandchild is under 18 and you do not have guardianship, you can open a custodial account in their name with yourself as the custodian — the account belongs to them, but you control it until they reach the age of majority (usually 18 or 21, depending on your state and the account type). If you have legal guardianship, you can open a regular account and manage it as their guardian. If your grandchild is 18 or older, they must open the account themselves, though you can be present and help with the process.

The mechanics are straightforward: you go to a bank or credit union with the required documents, name your grandchild as the account owner, and sign the paperwork. The account number and debit card will be in their name. Money you deposit becomes their money legally — it is not a loan, and it is not yours to take back. This matters because it affects taxes, financial aid, and what happens to the money if you die.

Key Takeaways

  • A custodial account lets you open and control a bank account for a minor grandchild without guardianship, and the account belongs to them from day one.
  • You will need your grandchild's Social Security number, proof of their identity (birth certificate), and your own ID and proof of address to open the account.
  • Money in a custodial account counts as your grandchild's asset for financial aid purposes, which can reduce the amount of aid they receive in college.
  • When your grandchild reaches the age of majority (usually 18 or 21), the account transfers to them completely and you lose all control.
  • If you have legal guardianship, you can open a standard account instead and manage it under guardianship rules, which vary by state.

Custodial accounts: how they work and what you control

A custodial account is a bank account opened in your grandchild's name with you named as the custodian. You control the account while they are a minor — you can deposit money, withdraw money, and make decisions about how it is used. The account itself belongs to your grandchild from the moment it opens. This is the most common route for grandparents who want to save for or manage money for a grandchild without guardianship.

The two main types are UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gifts to Minors Act) accounts. UTMA accounts are more common now and allow you to transfer a broader range of assets — not just money, but also securities and real estate. UGMA accounts are older and limited to gifts of money and securities. Both work the same way at a bank: you open it, you control it while the child is a minor, and it transfers to them automatically at the age of majority. Your state law determines which one is available and at what age the transfer happens (usually 18, 21, or 25).

You do not need a court order or guardianship paperwork to open a custodial account. You straightforward tell the bank you want to open one, provide your grandchild's Social Security number and birth certificate, and sign the account agreement. The bank will ask you to confirm you are not the grandchild's parent — if you are, the rules are different and the account may be treated as a parental account instead.

Documents you need to bring to the bank

To open a custodial account, bring your grandchild's birth certificate (original or certified copy) and their Social Security number. If your grandchild does not have a Social Security number, you can still open the account, but the bank will ask you to provide it within a certain period — usually 30 days — or the account may be closed. You can obtain a Social Security number from the Social Security Administration if your grandchild does not have one yet.

You will also need your own identification (driver's license or passport) and proof of your current address (a utility bill, lease, or bank statement dated within the last 60 days). Some banks may ask for additional information about your relationship to the grandchild or your reason for opening the account, though this is less common. Call the bank ahead of time to confirm what they require — requirements vary slightly between institutions.

What happens to the money: taxes and financial aid

Money in a custodial account is your grandchild's money for tax purposes. If the account earns interest or investment income, that income is reported on your grandchild's tax return, not yours. The first portion of unearned income (interest, dividends) is usually tax-free each year — the threshold varies annually, but it is typically around $1,250 for 2024. Income above that threshold is taxed at your grandchild's rate, which is usually lower than yours. If your grandchild has no other income, they may not owe taxes at all.

For financial aid purposes, money in a custodial account counts as your grandchild's asset. When they explore for federal student aid (FAFSA), the account balance is included in their assets and reduces the amount of aid they are considered to need. This can lower their aid package compared to if the money were in your name. If you are planning to save for college, you may want to discuss this with a tax professional or financial planner, as there are other savings vehicles (like 529 plans) that may have different treatment.

What you cannot do with a custodial account

You cannot use the money in the account for your own expenses. The account belongs to your grandchild, and the money must be used for their benefit — education, medical care, living expenses, or other needs. If you withdraw money and spend it on yourself, you are technically taking money that belongs to a minor, which can create legal and tax problems. The IRS can challenge withdrawals that do not appear to benefit the grandchild.

You also cannot change who the account belongs to or redirect it to another grandchild or family member. Once the account is opened in your grandchild's name, it stays in their name. You cannot move the money to a different account in your name, and you cannot name yourself as a beneficiary if something happens to you. When you die, the account passes to your grandchild as part of their assets — it does not go through your estate.

At the age of majority, you lose all control. Your grandchild becomes the sole owner and can withdraw all the money, close the account, or do whatever they want with it. You have no say in how they use it. If you are concerned about this, you may want to consider a trust instead of a custodial account, though a trust requires more paperwork and usually costs money to set up.

If you have legal guardianship: a different path

If you have been named your grandchild's legal guardian by a court, you can open a standard bank account in their name and manage it under guardianship rules. This is different from a custodial account because the guardianship is documented in court records and you have broader authority to make decisions on your grandchild's behalf. You will need to bring the guardianship order (a certified copy from the court) to the bank, along with your ID and your grandchild's birth certificate and Social Security number.

Guardianship accounts work similarly to custodial accounts in practice — you control the account and make withdrawals for your grandchild's benefit — but the legal framework is different. Some states require guardians to account for how money is spent, and you may need court approval for certain large withdrawals or investments. The rules vary significantly by state, so check with your state's probate court or a family law attorney if you have questions about your specific guardianship.

When your grandchild turns 18 or 21: what happens next

When your grandchild reaches the age of majority (the age set by your state's UTMA or UGMA law, usually 18 or 21), the custodial account automatically converts to a regular account in their name. You are removed as custodian and have no further control. Your grandchild can access all the money, close the account, or manage it however they choose. The bank will typically send them a notice before or around the time of the transfer, but the responsibility to follow up is on them.

If you want to stay involved in managing the money after they reach the age of majority, you will need their permission. You could ask them to add you as an authorized user on the account, or they could give you power of attorney, but these are their decisions to make. Many grandparents use the transition as a teaching moment — discussing how to manage money, what the account is for, and what their plans are for it.

Alternatives if a custodial account does not fit your situation

If you want to save for your grandchild's education specifically, a 529 plan may be a better option. You open a 529 account in your grandchild's name, contribute money, and it grows tax-free as long as it is used for education expenses. The money stays in the account until it is used for college, trade school, or other education costs. You maintain more control over how the money is used compared to a custodial account, and it has different tax and financial aid treatment.

If you want to leave money to your grandchild but are concerned about them having access to it too early, a trust is another option. You can set up a trust that names your grandchild as a beneficiary and specifies when and how they receive the money — for example, at age 25, or in installments. A trust requires legal paperwork and usually costs money to set up, but it gives you much more control over the terms. An attorney who handles estate planning can explain whether a trust makes sense for your situation.

Frequently Asked Questions

Do I need my grandchild's permission to open a custodial account?

No. As the custodian, you can open the account without their knowledge or permission. However, they will eventually find out — the bank may send statements to the address on file, and they will definitely know when they turn 18 or 21 and the account transfers to them. Many grandparents tell the grandchild about the account when they are old enough to understand it, but you are not required to.

What if my grandchild's parents do not want me to open an account?

You can still open a custodial account — it is your legal right as a grandparent. However, if the parents have custody and object, there may be family conflict. If the parents are concerned about the money being used for something they do not approve of, you could discuss your intentions with them or consider a 529 plan for education instead, which has clearer restrictions on how the money is used.

Can I name myself as a beneficiary so the money comes to me if my grandchild dies?

No. The money in a custodial account belongs to your grandchild, and if they die, it becomes part of their estate. You cannot redirect it to yourself. If you want to may support money goes to other family members if your grandchild dies, you would need to set up a trust with specific terms, not a custodial account.

Will opening a custodial account affect my grandchild's government benefits?

It depends on what benefits they receive. Money in a custodial account counts as their asset for means-tested benefits like SSI (Supplemental Security Income) or Medicaid. If your grandchild receives these benefits, a large account balance could reduce or eliminate their benefits. If your grandchild receives SSI, talk to a benefits counselor before opening an account, as there are limits on how much they can have in assets.

Can I open a joint account with my grandchild instead of a custodial account?

You can, but it is not recommended for minors. A joint account means you both own the account equally, and either of you can withdraw all the money. If something happens to you, the account passes to your grandchild automatically, which can complicate your estate. A custodial account is clearer legally and is the standard way to save for a minor. Once your grandchild is 18, a joint account becomes more practical if you both want access.