Yes, you can open a brokerage account for your child, but the account structure depends on their age

You can open an investment account in your child's name at most brokerages, but you cannot straightforward hand them the login and walk away. If your child is under 18, you must act as the custodian — the legal adult responsible for the account until they reach the age of majority (18 or 21, depending on your state). The brokerage holds the assets in your child's name, but you control all trades and withdrawals until that age arrives.

If your child is 18 or older, they can open their own account without you. You can still fund it, but they own and control it from day one. The choice between these two structures — custodial versus independent — shapes what you can do with the money and when your child can access it.

Key Takeaways

  • Children under 18 need a custodial account, where you control the investments until they reach the age of majority in your state.
  • Custodial accounts come in two legal forms: UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act), with UTMA allowing more types of assets.
  • Money in a custodial account belongs to your child for tax purposes, which can lower your family's total tax bill if your child has little or no income.
  • When your child reaches the age of majority, the account transfers to their full control — you cannot keep managing it or restrict their use of the funds.
  • Most major brokerages offer custodial accounts, but fees, investment options, and minimum deposits vary widely.

Custodial accounts: the legal structure for minors

A custodial account is an investment account registered in your child's name but controlled by you until they come of age. The brokerage requires you to provide your child's Social Security number and your own, along with proof of your relationship. You are the custodian, not the owner — a distinction that matters for taxes and for what happens when your child turns 18 or 21.

Custodial accounts exist in two forms. UGMA accounts (Uniform Gifts to Minors Act) hold cash, stocks, bonds, and mutual funds. UTMA accounts (Uniform Transfers to Minors Act) can hold those same assets plus real estate, artwork, and other property. Most people use UTMA because it is broader, but your state may have a preference or requirement. When you open the account, the brokerage will ask which type you want; if you are unsure, ask them which is standard in your state.

The account is irrevocable once opened. You cannot change your mind and move the money back into your own name. The assets belong to your child, even though you control them now. This matters because it shapes the tax bill and because it is legally binding when your child reaches adulthood.

How taxes work in a custodial account

Money in a custodial account is taxed in your child's name, not yours. This is often the whole point: if your child has no job and no other income, the first portion of investment gains may be taxed at their rate (often zero or very low) rather than yours. The exact amount varies by year, but as of 2024, a child can earn roughly $1,400 in investment income before owing federal tax, compared to your likely higher rate.

Once investment income exceeds that threshold, the "kiddie tax" rule kicks in. Income above the limit is taxed at your rate, not your child's, until they turn 18 (or 24 if they are a full-time student with earned income below a threshold). This rule exists to prevent parents from shifting large amounts of income to children to avoid taxes. You will report the account on your tax return using your child's Social Security number.

You do not need to file a separate tax return for the account unless the income is substantial. Most brokerages send a 1099 form in January showing what was earned. Talk to a tax professional if the account generates more than a few hundred dollars per year in gains, because the rules around kiddie tax are specific and depend on your family's total income.

What happens when your child reaches adulthood

When your child turns 18 (or 21 in some states), the account automatically transfers to their control. You lose the ability to make trades, withdraw money, or restrict how they use it. This is not optional — the law requires the transfer. You cannot keep the account in custodial form or ask the brokerage to hold the money longer.

This timing matters if you are saving for a specific goal, like college. If you open a custodial account when your child is 15, the money will be in their hands at 18, right when college bills arrive. They could spend it on something else. If you want to restrict access until later, a custodial account is not the right tool — you would need a trust, which requires a lawyer and is more expensive to set up and maintain.

Some parents use custodial accounts for younger children (under 14) and plan to have the conversation about money and responsibility before the transfer happens. Others use them only for small amounts they are comfortable with their child controlling. There is no rule about what you must do; the transfer is automatic, and what happens next is between you and your child.

Opening the account: what you need and where to do it

Most major brokerages offer custodial accounts: Fidelity, Charles Schwab, Vanguard, E-Trade, and Merrill Edge all have them. Some online-only brokerages like Webull and Robinhood do not. The process is similar across brokerages: you provide your name, address, and Social Security number; your child's name, date of birth, and Social Security number; and proof of your relationship (usually a birth certificate or adoption papers).

Some brokerages have minimum deposits ($0 to $2,500, depending on the firm), and some charge annual fees for custodial accounts (typically $0 to $25 per year). A few offer commission-free stock and ETF trades but charge for mutual funds or other products. Before you open an account, check the fee schedule and investment options. If you plan to buy individual stocks, make sure the brokerage offers them. If you want low-cost index funds, confirm they have them and at what cost.

The account can be opened online in most cases, though some brokerages require you to mail in signed forms. Once it is open, you can fund it by transferring money from your bank account, writing a check, or setting up automatic deposits. There is no annual contribution limit for custodial accounts (unlike 529 college savings plans), but gifts over a certain amount may trigger gift tax reporting — talk to a tax professional if you are planning to deposit more than $18,000 in a single year.

Investment options and how to choose them

What you can buy in a custodial account depends on the brokerage, but most allow stocks, ETFs, mutual funds, and bonds. Some allow options trading or cryptocurrency, though this is less common and often requires you to request it. For a child's account, most parents stick to straightforward, low-cost options: index funds or ETFs that track the whole market, or a mix of stocks and bonds that becomes more conservative as your child gets older.

A common approach is a target-date fund, which automatically shifts from stocks to bonds as your child approaches adulthood. Another is a straightforward three-fund portfolio: a U.S. stock index, an international stock index, and a bond index. Both require minimal decisions once set up and keep costs low. Avoid individual stock picking or frequent trading — the account is meant to grow over time, and every trade costs money and time.

If you are unsure what to buy, many brokerages offer educational resources or robo-advisor tools that suggest a portfolio based on your child's age and your risk tolerance. These are usually free or low-cost and can be a good starting point if you are new to investing.

Custodial accounts versus other savings options

A custodial brokerage account is not the only way to save for your child. A 529 college savings plan offers tax advantages specifically for education but restricts how the money can be used — withdrawals for non-education expenses trigger taxes and penalties. A Coverdell ESA (Education Savings Account) is similar but has lower contribution limits. A regular savings account or CD in your child's name avoids investment risk but earns very little.

A custodial account is most useful if you want flexibility: the money can be used for anything, it grows through investment, and the tax treatment is favorable if your child has little income. It is less useful if you want to restrict access until your child is older (use a trust for that) or if you want to may provide the money stays in your hands (it will not — the law requires transfer at adulthood).

Frequently Asked Questions

Can I change my mind and close the account?

You can close the account, but the money still belongs to your child. You cannot move it back into your own name or use it for yourself. If you close it, you must either transfer the balance to your child or to another custodial account in their name at a different brokerage.

Does a custodial account affect my child's financial aid for college?

Yes. Money in a custodial account is counted as your child's asset on the FAFSA (Free process for Federal Student Aid), which reduces their may be able to access for need-based aid. The impact is significant — roughly 20 percent of the account balance is expected to go toward college costs each year. A 529 plan, by contrast, is counted as a parent asset and has less impact on aid.

What if my child is disabled or has special needs?

A custodial account can disqualify your child from means-tested benefits like SSI (Supplemental Security Income) or Medicaid if the balance is too high. If your child receives these benefits, talk to a special needs attorney before opening an account. A special needs trust is usually the better option.

Can my child have more than one custodial account?

Yes. You can open multiple custodial accounts at different brokerages, or multiple accounts at the same brokerage. There is no legal limit. However, you are responsible for tracking all of them and reporting the income on your taxes, so keep records organized.

What if I die before my child reaches adulthood?

The account does not disappear, but control passes to a successor custodian you name when you open it. If you do not name one, the court will appoint a guardian. Make sure you name a successor custodian and tell them the account exists. Without that step, the account could be frozen or difficult for your child to access.