What happens when you gift a savings account

You cannot directly transfer ownership of an existing savings account to someone else. Banks do not allow account holders to change who owns an account after it is opened. What you can do instead is open a new account in the other person's name, fund it with a deposit, and give them control of it. The account belongs to them from that moment forward—they can withdraw money, add to it, or close it without your permission.

The mechanics depend on whether the person is an adult or a minor. For an adult, you straightforward deposit money into an account they own. For a minor, you open a custodial or joint account where you retain some legal control until they reach the age of majority (usually 18 or 21, depending on your state and the bank). At that point, the account converts to their sole ownership.

The money you deposit is a gift, not a loan. Once it is in the account, it belongs to the recipient. You have no claim to it, and you cannot take it back. If you need the money later, you cannot recover it from the account.

Key Takeaways

  • You cannot transfer an existing account to someone else; you must open a new account in their name and fund it with a deposit.
  • For adults, you open a standard savings account in their name and deposit money; they own it when ready and can do whatever they want with it.
  • For minors, you open a custodial savings account (UTMA or UGMA) where you control the account until they reach age 18 or 21, then it becomes theirs.
  • Deposits over $18,000 per person per year may trigger gift tax reporting, though most people owe no tax; check with a tax professional if you are gifting a large amount.
  • The money is a gift once deposited—you cannot take it back or claim it as a loan unless you have a written agreement stating otherwise.

Opening a savings account in someone else's name

To open an account for an adult, you need their Social Security number, date of birth, and current address. You do not need to be present in person at most banks—many allow you to open an account online or by phone and fund it when ready with a transfer from your own account. The account is opened in their name alone, and you are not listed as an owner.

Once the account exists and has money in it, you can give the person the account number, routing number, and login credentials (if online banking is set up). They can then access the account, withdraw funds, or transfer money out. You have no further control over it unless they add you as an authorized user, which they can do or undo at any time.

Some banks require the account holder to be present in person to open the account, especially if you are not already a customer. Call the bank ahead of time to ask what documents and steps are required. If the person lives far away, you may need to mail them the paperwork to sign, or they may be able to open the account themselves and you straightforward transfer money into it.

Custodial accounts for minors

If you are gifting money to a child, you open a custodial savings account under one of two legal structures: UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act). Both work similarly. You are the custodian, meaning you control the account and manage the money on the child's behalf until they reach the age of majority. The child is the beneficiary—the account is legally theirs, but they cannot access it without your permission until they are old enough.

The age at which the account transfers to the child's sole control varies by state and by account type. Most states use age 18 or 21. When that birthday arrives, the account automatically becomes the child's to control, and you lose all authority over it. You cannot prevent them from withdrawing the money or spending it however they want.

To open a custodial account, you need the child's Social Security number and date of birth. You will also need to provide your own information as the custodian. Most banks allow you to open these accounts online or in person. You can fund the account with an initial deposit and add money to it over time. The money grows tax-deferred up to a limit—the first $1,300 or so of annual earnings is tax-free (the exact amount changes yearly), and earnings above that are taxed at the child's rate, which is usually lower than yours.

Tax reporting for gifts over a certain size

The IRS allows you to give up to $18,000 per person per year (in 2024) without filing a gift tax return. This limit applies to each recipient separately—you can give $18,000 to one person and $18,000 to another without triggering any reporting. If you give more than $18,000 to one person in a single year, you must file Form 709 (Gift Tax Return) with the IRS, even if you owe no tax.

Most people who file Form 709 owe no actual tax because of a lifetime exemption of $13.61 million (in 2024). However, the filing itself is required. If you are unsure whether your gift crosses the threshold, or if you are gifting a large amount, consult a tax professional or accountant. They can tell you what forms to file and whether you have any tax liability.

Gifts to spouses have no limit, and gifts to charity have no limit. Gifts that pay tuition or medical bills directly to the institution also do not count toward the annual limit, as long as you pay the provider directly rather than giving money to the person.

What to do if you want the money back later

Once you deposit money into someone else's account as a gift, it is legally theirs. You cannot take it back. If you later need the money and the person refuses to return it, you have no legal claim to it—the courts will not force them to repay you because it was a gift, not a loan.

If you want to retain the right to get the money back, you must structure it as a loan, not a gift. Put the agreement in writing: state the amount, the interest rate (if any), and the repayment terms. Both of you should sign it. With a written loan agreement, you have legal recourse if the person does not repay you. Without one, the IRS and the courts will treat it as a gift.

Some people give money to a minor in a custodial account with the intention of using it for the child's education or other expenses, then taking back any leftover money when the child reaches adulthood. This is legally risky. Once the account converts to the child's sole control, the money is theirs, and you have no claim to it. If you want to retain control over how the money is used, consider a trust instead of a custodial account, but that requires a lawyer to set up.

Choosing the right bank for a gifted account

Any bank that offers savings accounts can hold a gifted account. The choice depends on what matters to you and the recipient. If the person already banks somewhere, opening the account at the same bank makes it easier for them to manage. If they do not have a bank yet, look for one with no monthly fees, no minimum balance requirement, and online access so they can check the account anytime.

High-yield savings accounts pay more interest than standard savings accounts—sometimes 4% or more, compared to 0.01% at large national banks. If you are gifting a substantial amount and want the money to grow, a high-yield account at an online bank or credit union may be a better choice than a traditional bank. The tradeoff is that online banks have no physical branches, so the person cannot walk in to deposit cash or speak to someone in person.

For a minor's custodial account, some banks offer accounts specifically designed for children, with educational tools or parental controls built in. Others treat custodial accounts the same as any other account. Ask the bank what features are available and whether there are any fees specific to custodial accounts.

Frequently Asked Questions

Can I open a savings account for someone without their permission?

You can open an account in someone's name if you have their Social Security number and date of birth, but most banks will not let you fund it or access it without their knowledge. For an adult, the ethical and legal approach is to tell them you want to open an account for them and get their consent. For a minor, you can open a custodial account without their permission—that is the point of custodial accounts.

What happens to a custodial account when the child turns 18?

The account automatically converts to the child's sole ownership. You lose all control and cannot access it anymore. The child can withdraw all the money, close the account, or do whatever they want with it. Some banks send a notice before the conversion happens so you are not surprised.

Can I gift a savings account to someone who is not a U.S. citizen?

Most banks require a Social Security number or Individual Taxpayer Identification Number (ITIN) to open an account. A non-citizen with an ITIN can open an account. If the person does not have either, they may not be able to open a standard savings account, though some banks and credit unions have accounts for undocumented immigrants. Call ahead to ask what the bank requires.

Is there a difference between gifting money and opening a joint account?

Yes. A gift account is in the other person's name alone—you have no ownership or access. A joint account has both names on it, and both people can access and withdraw money. If you want to give someone money and have no further involvement, open an account in their name. If you want to retain access or share control, open a joint account instead.

Do I have to report the gift to the IRS?

Only if the gift exceeds $18,000 per person per year (in 2024). If you stay under that amount, no reporting is required. If you go over it, you file Form 709, though you likely owe no tax. The limit changes yearly, so check the current year's limit if you are gifting a large amount.