What happens to custodial accounts when your child turns 18?

A custodial account is a bank or investment account managed by an adult on behalf of a minor child until the child is a legal adult. The assets in the account belong to the child – they are considered irrevocable gifts to the child. The adult custodian has a fiduciary duty to manage the account with the child’s best interests in mind. With a (usually) long time horizon, custodial accounts can help jumpstart a child’s financial future.

If you or your parents have set up a custodial account for your child, control of the account will transfer to them when they reach the age of majority – sometimes 18, but more typically 21. Oftentimes, nothing happens when the child turns 18. The exact timing depends on the type of custodial account, the laws of the state where the account was opened, the circumstances under which the account was opened and the age selected by the custodian when the account was opened.

So, what happens when the child reaches the age of majority? Learn more below.

When control officially changes: UGMA vs. UTMA

UGMA is an older law governing custodial accounts, and UGMA accounts typically hold traditional financial investments, such as stocks, bonds and mutual funds, or cash. In 2026, only South Carolina and Vermont have UGMA accounts. UTMA is a more modern law; it expanded the types of assets that can be placed in custodial accounts, allowing for a wider range of real or personal property in a custodial account. Each state has implemented a version of UGMA or UTMA or both, and many states made state-specific changes to the uniform law.

Assets contributed to either UGMA or UTMA accounts are considered an irrevocable gift to the child. This means the child is the legal owner of the funds even while they are still a minor. The custodian’s role is to manage the account responsibly in the child’s best interests until the child reaches the age when control must transfer.

The age of majority varies from state to state. The default age of majority in most states is 21. Some states allow the person who opens the account to specify a different age, sometimes up to 25, but this must be done when the account is opened and may be limited to certain circumstances.

What changes when your child reaches the age of majority?

When the beneficiary of the custodial account reaches the age of majority, the most significant change is to the legal ownership of the account. The account itself does not change. The custodian’s authority to manage the account ends, and the child – now an adult – becomes the sole decision-maker and can decide how the money is saved, spent or invested.

There are also some administrative updates to take care of when the account transfers, including removing the custodian from the account, updating login credentials and making sure statements and tax documents are directed to the newly legal adult. Because the assets were already legally considered the beneficiary’s property within the custodial account, the transition is generally just a change in account registration – not a sale or new transfer of funds – so it’s not a taxable event.

How to retitle a custodial account in the child’s name

Retitling the account so that it’s in the child’s name is as simple as contacting the bank or brokerage firm where the account is held and requesting the paperwork to transfer ownership. You can do this when the child reaches the age of majority specified on the account.

Once the documentation is completed, the account is retitled in the child’s name. The investments within the account typically remain in place, and details like cost basis and holding periods carry over with the assets.

The transfer itself can take several business days, depending on the financial institution and the types of investments held in the account. During that time, the account may be temporarily frozen.

A pretransfer checklist for parents and teens

Before a custodial account officially transfers to a child, it’s worth taking some time to prepare. The transition is more than just paperwork, as it’s often the first time a young adult takes full responsibility for a bank or investment account. Reviewing the rules that apply to the account, discussing financial goals and understanding potential tax and financial aid implications can help make the handoff smoother for everyone involved.

Before the transfer, families may want to consider taking the following steps:

Taxes: What to know

Transferring a custodial account to the beneficiary does not create a taxable event. After all, the assets were already considered the beneficiary’s property while the account was managed by the custodian.

Once the account is in the young adult’s name, however, investment income may still be subject to “kiddie tax” rules depending on the child’s age and income level.

Options if your child isn’t ready for full control of their custodial account

In most situations, once the beneficiary of a custodial account reaches the age of majority, the custodian cannot legally maintain control of the assets. Trying to avoid the transfer may lead to legal complications. So, unfortunately, even if your child isn’t ready, there are often few alternatives to having them gain control of the custodial account.

To prepare your child, consider talking with a financial professional and include your child in that conversation so they can better understand their custodial account, how it works and what best practices they can follow.

For future gifts, families who want more control over how funds are distributed may want to consider a trust or other estate planning structures that allow for longer-term oversight.

The bottom line

Custodial accounts can be a meaningful way to give your child a head start on saving and investing for their future. But they also come with a defined timeline, as the child takes full control of the account upon reaching the age of majority – usually 21, but it depends on the state, account type and age selected by the adult when the account was opened. The custodian’s authority also ends when the child reaches the age of majority.

By reviewing the applicable rules, discussing financial goals and preparing children for the responsibility of a brokerage account, families can help ensure the transition is a smooth one.

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