You can open a savings account for a minor or an incapacitated adult, but the account belongs to them, not you
If you want to save money for someone else—a child, a grandchild, an elderly parent—you have real options, but they work differently depending on who the person is and what legal authority you have. The account will be in their name, they own the money in it, and you act as the custodian or authorized signer. Banks do not let you open an account that legally belongs to you but holds someone else's money.
The most common route is a custodial account for a minor, where you open and manage the account until they reach the age of majority (18 or 21, depending on your state). For an adult who cannot manage their own finances, you need either a power of attorney or guardianship—legal documents that give you authority to act on their behalf. Without one of these, the bank will not let you open an account in their name.
Key Takeaways
- A custodial account for a minor is the simplest option and requires only the child's Social Security number, your ID, and an initial deposit.
- You must have legal authority—power of attorney, guardianship, or conservatorship—to open an account for an adult who cannot manage their own finances.
- The account belongs to the account holder, not to you, even though you control it; the money is theirs to inherit or claim when they reach adulthood.
- Different account types (UTMA, UGMA, or plain custodial) have different tax and control rules, and your choice affects what happens to the money later.
- You will need the account holder's Social Security number, a government ID for yourself, and proof of your legal relationship or authority.
Custodial accounts for minors: the most straightforward path
A custodial account is a savings account opened in a child's name with you as the custodian. You deposit money, manage the account, and make withdrawals on the child's behalf until they reach the age of majority. At that point, the account transfers to them and they have full control. This is the standard way grandparents, parents, and other relatives save for children.
Two legal frameworks exist: UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gifts to Minors Act). UTMA is newer and available in all 50 states; UGMA is older and not available in South Carolina. The difference matters for taxes and control. Under UTMA, the child owns the account and its earnings, so income tax is owed on interest above a certain threshold (currently $1,300 per year for 2024, though this changes annually). Under UGMA, the rules are slightly more restrictive. Most banks default to UTMA unless you specify otherwise.
To open a custodial account, bring your government ID, the child's Social Security number, and an initial deposit (usually $25 to $100, depending on the bank). The bank will ask your relationship to the child and your state of residence. Some banks let you open online; others require a branch visit. The process takes 10 to 15 minutes if you have all documents ready.
Power of attorney for an adult who cannot manage finances
If you want to open an account for an adult—a parent with dementia, a sibling with a disability, a spouse who is incapacitated—you need a power of attorney document signed by that person (or their legal guardian) that explicitly grants you authority over financial accounts. This is a legal document, not something the bank provides. You must obtain it before you go to the bank.
A power of attorney can be general (giving you broad financial authority) or limited (giving you authority only for specific tasks, like opening a savings account). It can be durable, meaning it remains valid if the person becomes incapacitated, or non-durable, meaning it ends if they do. For someone already incapacitated, a durable power of attorney signed before they lost capacity is what you need. If they never signed one, you will need guardianship or conservatorship instead (see below).
To create a power of attorney, you can use a template from your state bar association or an online legal service, or hire an attorney. Costs range from free (if you use a template) to $300 to $500 (if you hire a lawyer). The document must be signed by the account holder in front of a notary public. Bring the signed, notarized power of attorney to the bank along with the person's ID and Social Security number. The bank will keep a copy on file.
Guardianship and conservatorship when power of attorney is not an option
If the adult never signed a power of attorney and is now incapacitated, you cannot open an account in their name without court approval. You must petition the court for guardianship (which gives you authority over personal and financial decisions) or conservatorship (which gives you authority over finances only). The process varies by state but typically takes two to four months and costs $1,000 to $3,000 in court and attorney fees.
Guardianship and conservatorship require you to prove in court that the person cannot manage their own affairs. You will need medical documentation, a petition form, and often a hearing. Once the court appoints you, you receive letters of guardianship or conservatorship—a court document that proves your authority. Bring this to the bank along with the person's ID and Social Security number.
This route is slower and more expensive than power of attorney, but it is the only option if no power of attorney exists. Some states allow you to petition for a limited conservatorship that covers only financial accounts, which is faster than full guardianship.
What documents you need at the bank
| Account Type | Documents Required | Who Provides Them |
|---|---|---|
| Custodial account (minor) | Your government ID, child's Social Security number, initial deposit | You and the child (no signature from child needed) |
| Account with power of attorney | Your government ID, account holder's ID, account holder's Social Security number, signed and notarized power of attorney | You and the account holder (or their notary) |
| Account with guardianship | Your government ID, account holder's ID, account holder's Social Security number, court-issued letters of guardianship | You and the court |
Banks vary in what they require. Some will accept a photocopy of the power of attorney or guardianship letter; others want the original. Call ahead and ask what the bank needs before you visit. If you are opening the account online, you may need to mail or upload documents rather than showing them in person.
Tax implications and what happens when the account holder reaches adulthood
In a custodial account, the child is the owner and must report interest income on their tax return (or yours, if you file jointly). The first $1,300 of unearned income per year is tax-free for 2024; income above that is taxed at the child's rate until they turn 18 (or 19 if they are a full-time student). This is usually lower than your tax rate, which is why custodial accounts are tax-efficient for saving for children.
When the child reaches the age of majority (18 or 21, depending on your state), the account automatically transfers to them. You lose control. They can withdraw the money, close the account, or leave it open. You cannot prevent them from spending it, and you have no legal claim to it. If you want to retain control past adulthood, a custodial account is not the right tool—you would need a trust instead, which requires a lawyer to set up.
For accounts opened with power of attorney or guardianship, the account belongs to the account holder, and you are straightforward authorized to manage it on their behalf. When your authority ends (the person regains capacity, the power of attorney is revoked, or guardianship is terminated), you must transfer control of the account to them or their new representative.
Joint accounts: why they are not the same as opening an account for someone else
Some people consider opening a joint account instead—where both you and the other person are owners. This is different from a custodial account or a power of attorney arrangement. In a joint account, you both own the money equally, and either of you can withdraw it all. If you die, the money passes to the surviving joint owner, not to your estate. If the other person dies, the money passes to you.
Joint accounts are useful if you want to share money with someone (like a spouse or adult child), but they are not the right choice if you want to save money for someone else. A joint account with a minor is legally risky because the child can withdraw the money once they reach adulthood, and the account may be considered a gift for tax purposes. A joint account with an incapacitated adult can create problems if you die or become incapacitated yourself, because the other person may not be able to manage the account alone.
Frequently Asked Questions
Can I open a savings account for a grandchild without the parent's permission?
You can open a custodial account for a grandchild without the parent's permission, but the parent may object. The account is in the grandchild's name, and you are the custodian. If the parent is the child's legal guardian, they have the right to know about the account and may ask the bank to add themselves as a co-custodian. The bank will not stop you from opening the account, but family conflict may follow.
What if the person I want to open an account for is an adult but not incapacitated?
If they are a capable adult, they should open the account themselves. You cannot legally open an account in their name without their knowledge and consent. If they want you to manage the account, they can sign a power of attorney or add you as an authorized signer, but the account must be opened in their presence (or with their explicit written consent) at the bank.
Do I need a lawyer to set up a power of attorney?
No, but it helps. You can read a template from your state bar association website or use an online legal service for $50 to $150. The document must be signed by the account holder in front of a notary public (usually $10 to $20). A lawyer charges $300 to $500 but ensures the document is valid in your state and covers all scenarios you might face.
What happens if I die while I am the custodian of a minor's account?
The account remains in the child's name and belongs to them. If you named a successor custodian when you opened the account, that person takes over. If you did not, the account may be frozen until the court appoints a new custodian or the child reaches adulthood. Naming a successor custodian at the time you open the account prevents this problem.
Can I withdraw money from a custodial account for my own use?
Legally, no. The money in a custodial account belongs to the child, not to you. Withdrawing it for your own use is considered theft or embezzlement. You can withdraw money to pay for the child's expenses (education, medical care, living costs), but not for your own benefit. The IRS and state authorities can investigate if they suspect misuse.