What do you need to open a custodial account?
Editorial staff, J.P. Morgan Wealth Management
- A custodial account is a financial account opened and managed by an adult on behalf of a child until they reach the age of majority.
- To open a custodial account, you’ll need to provide basic information about yourself and the child, including your names, birthdates and Social Security numbers.
- Gifts to custodial accounts are irrevocable, so once money is gifted, it belongs to the child and can’t be taken back.
Parents and family members can give children a financial head start in life with a custodial account. While this type of account is just one option, it can help you save and invest on behalf of a child, giving them a foundation to help pay for college, buy a first home, start a business or some other milestone. And the good news is that opening a custodial account requires just a few key details.
To get started, you’ll need identifying documents for both you and the child, Social Security numbers and money to fund the account. From there, you can select the right account type and pick a financial institution. Let’s look at how the process works and what to consider before opening a custodial account.
Key details about custodial accounts
A custodial account is a financial account established for a minor. An adult sets up and manages the account on behalf of and in the best interest of the child, overseeing all investment and spending decisions until the child reaches the age of majority, which varies by state.
There are no annual contribution limits, and the money you save or invest can be withdrawn at any time as long as it’s spent on expenses for the child. There are two types of custodial accounts: Uniform Gifts to Minors Act (UGMA) accounts and Uniform Transfers to Minors Act (UTMA) accounts. 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. The UTMA expanded the types of assets that can be placed in custodial accounts, allowing for a wider range of real or personal property. A UTMA also allows property to be transferred through inheritance as well as direct gifting.
All contributions to a custodial account are irrevocable: Once you put money or assets into the account, that gift legally belongs to the child and can’t be taken back. As the custodian, you also take on a fiduciary duty to ensure every investment and spending decision is made in the child’s best interest, not your own.
It’s important to note that the custodian doesn’t have to be the child’s parent. Any adult can open and manage a custodial account on a minor’s behalf.
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Your checklist: What you need to open a custodial account
Opening a custodial account can be a simple process, but it’s a good idea to gather all the necessary information and documents first. While the specifics can vary depending on your financial institution, here’s an overview of what you can expect to provide.
For the child
- Full legal name
- Date of birth
- Social Security number
- Home address
For the custodian
- Full legal name
- Date of birth
- Social Security number
- Government-issued photo ID
- Contact information, including address, phone number and email
Account setup information
- State of residence
- Account type (UGMA or UTMA)
- Age of majority or age when you want the child to assume ownership of the account
- A funding source, like a linked bank account
- Initial contribution amount
- Beneficiary or successor custodian designations
How to open and fund a custodial account
Once you’ve gathered your documents, here are the steps to open and fund the account:
- Choose a provider and account type: Banks, brokerage firms and credit unions offer custodial accounts. Before choosing a provider, compare investment options, fees and minimum balance requirements. You should also confirm whether the provider offers UGMA accounts, UTMA accounts or both.
- Complete the application: Next, you’ll fill out the account provider’s online application with the required information.
- Complete the identity verification: The provider will verify the identities of both the custodian and the beneficiary, so you should have any necessary documents on hand.
- Make an initial contribution: Connect your bank account to make an initial contribution to the custodial account. Some providers don’t require a minimum deposit to open the account, while others request an initial funding amount.
- Select investments: Depending on the account provider, you may be able to invest in stocks, exchange-traded funds (ETFs) or mutual funds, or to keep the funds in cash.
- Set up recurring contributions: Even if you’re unable to contribute a lot at the beginning, small, regular contributions can compound over time. Keep records of all contributions for tax purposes, including the cost basis of any securities you transfer. Anyone can contribute to the account once it's open, including grandparents, relatives and family friends.
What happens to the account when your child reaches the age of majority?
Once the child reaches the age of majority – typically 18 or 21 – control of the account transfers to them automatically. The age of majority varies by state and can even be as high as age 25. At that point, the beneficiary – now legally an adult – can use the money for any purpose they choose, and the custodian no longer controls the account. You may need to tackle some administrative tasks, like ensuring the child removes the old custodian from the account, updates login credentials, and updates where statements and tax documents are sent. Because the assets in the account were already legally considered the child’s property, the transition is really just more of a change in account registration – not a sale or new transfer of funds – so it’s not a taxable event.
Taxes and financial aid: 2 things to consider before you open
You’ll have to provide the child’s Social Security number to open a custodial account. That means any investment earnings, like dividends, interest and capital gains, are reported on the child’s tax return – and unearned income over a certain amount can trigger what’s known as the “kiddie tax.”
In 2026, the first $1,350 of a child’s unearned income is tax-free, and the next $1,350 is taxed at the child’s rate. Any amount above $2,700 is taxed at the parents’ marginal rate, which can be significantly higher. It’s important to track the cost basis carefully from the start. When the child eventually sells their investments, they’ll need accurate records to calculate the capital gains correctly.
Financial aid for higher education is often one of the most overlooked considerations when it comes to custodial accounts. For federal financial aid purposes, custodial accounts are reported as student assets on the Free Application for Federal Student Aid (FAFSA). Student assets are assessed at a higher rate in the aid formula, which can reduce need-based eligibility more quickly than parent-owned assets. In general, a student is expected to contribute up to 20% of their assets versus 5.64% for parents.
If saving for higher education is the primary goal for the account, you may want to think about opening a 529 plan instead. Unlike custodial accounts, 529 plans offer tax-free growth and tax-free withdrawals for qualified education expenses. When owned by a parent, a 529 plan is treated as a parental asset on the FAFSA and assessed at a lower rate. And when owned by a grandparent, a 529 plan is not considered at all for the FAFSA. However, 529 plan funds are restricted to qualified education expenses, while custodial accounts can be used for anything that benefits the child.
Common pitfalls and how to avoid them
Here are the biggest mistakes to avoid when opening a custodial account:
- Forgetting that gifts are irrevocable: Many people don’t realize that once money enters the account, it belongs to the child and can’t be taken back. Don’t contribute any funds you think you might need to access in the future.
- Not naming a successor: It’s important not only to choose the right custodian from the start, but also to consider what happens if that person becomes unable to manage the account. Assuming your provider allows it, name a successor who can seamlessly step in and take over if necessary.
- Not diversifying: Consider how diversification can help ensure the custodial account aligns with financial goals.
- Ignoring fees: Account fees and investment expense ratios can add up quickly if you’re not careful. You can avoid this by comparing multiple providers and investment types, and understanding what fees they charge.
- Forgetting tax forms and cost basis tracking: Your account provider will send tax documents annually. It’s important to keep track of them, especially those related to the cost basis of any transferred securities.
- Failing to consider financial aid implications: Prior to opening a custodial account, consult a financial advisor to find out how a large balance might affect a child’s ability to qualify for college financial aid.
- Not preparing your child to take over the account: Even if you think the child isn’t ready to take over an account with thousands of dollars in it, 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.
The bottom line
A custodial account can be used to save and invest on a child’s behalf. You’ll need to gather names, birthdates, Social Security numbers, bank account information, address and contact information, and more to open a custodial account for a child.
Custodial accounts have no annual contribution limits, and the funds can be withdrawn at any time as long as the money is used on expenses that benefit the child. If you’re ready to open a custodial account, ensure you have all the necessary information before you get started, and consult a financial professional if you have any questions about how a custodial account fits into your child’s financial plan.
Frequently asked questions about opening a custodial account for a child
Both custodial accounts and trusts hold assets for a minor’s benefit, but trusts give more control to the person opening the account. With a custodial account, the assets transfer automatically to the child at the age of majority with no restrictions on how the funds can be used. A trust can specify conditions for distributions, name multiple beneficiaries and extend well beyond the age of majority.
You can fund a custodial account by linking a bank account and transferring the funds. Once the account is open, additional contributions can be made through one-time deposits and recurring automatic transfers. There’s no limit to how much you can contribute each year. And anyone can contribute to the account, such as family and friends.
Yes, grandparents and other adults can contribute to a custodial account once it’s open. Each contributor can give up to $19,000 per year (as of 2026) without triggering a gift-tax filing requirement. Contributions above this threshold don’t necessarily result in taxes owed, but they do require filing IRS Form 709 and may count against the contributor’s lifetime gift and estate tax exemption.
While the custodian controls the account, the funds must be used for the child’s benefit, but the definition of what’s considered beneficial is fairly broad. For example, the funds can be used for educational costs, extracurricular activities or saving toward a future expense. Once the child reaches the age of majority and control of the account transfers to them, they can use the money for any purpose.
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Editorial staff, J.P. Morgan Wealth Management
