We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Custodial Account?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 65,206
Share

A custodial account is a common financial strategy for establishing and protecting financial assets for minor children. Often created by a parent or legal guardian, there are two common functions of this type of account. A minor’s account helps to ensure that financial resources are available to meet the needs of the child during adolescence. Second, the account creates a financial base that will allow the child to pursue a higher education after high school, launch a business, and in general get off to a solid start in life.

For the duration of the custodial account, an adult who has been appointed as the custodian handles the operation and management of the process. The custodian may be a parent or legal guardian. However, in situations where the parents or guardians are deceased, the custodian may be an individual who was pre-selected by the parents or is appointed by the courts. Essentially, the custodian handles the financial resources until the child reaches the age of majority and is recognized as a legal adult.

The exact components of a custodial account can vary, depending on circumstances. A savings account at a local bank can be considered to be such an account if opened on behalf of a minor by a parent or guardian. It is also possible to create investment accounts for a minor, including mutual funds, bonds, and other types of investments. Until the child reaches adulthood and can legally assume ownership of the assets, the custodian is responsible for maintaining the value of any assets included in the account, as well as growing the investments over time.

Custodial accounts are an excellent way to provide future assets for minor children. Because it is possible to add resources to the account at any time, parents can begin a custodial account with a small amount of money deposited into an interest bearing account, and later add bonds and other relatively safe investments as resources are available. By the time the child reaches adulthood, an account with modest beginnings can turn into a respectable financial base that can help with college and any number of other purposes.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
By anon241846 — On Jan 20, 2012

My mother is the custodian of mine and my sister's accounts. My sister and I have both reached the age of majority and we need the money for college, which our mother always told us the money was for and now she does not want to help us or give us our money for college. She wants the money for herself. What legal remedies at law do we have to get our money from her for our education?

By anon121671 — On Oct 25, 2010

I have been alienated from my daughter for 10 years. I had a custodial account with her that was liquidated in 2002 because of counseling, child support issues. She is now threatening to sue me for the money.

This is the first time we have talked in years. Can she take me to court and sue me over the money?

By anon109915 — On Sep 09, 2010

My mom, who recently died, had custodial savings and cd accounts for my children. How do i become the custodian now? Two of my kids are 15 and 16, two are 7 and 12. Help.

By anon103319 — On Aug 11, 2010

I had a custodial account for my daughter. Her mother was listed on the account as well, but I was listed as the custodian of the account. She closed the account and withdrew all the money without my knowledge or consent. Is this legal?

By anon64172 — On Feb 05, 2010

I have a custodian checking account for my step-dad who I have power of attorney. He is a dementia patient.

One of his old creditors made a payment agreement with him long after he was declared incompetent. This creditor has imposed two court ordered garnishments against this custodian account.

What recourse do I have to protect these funds to care for him in a nursing home and his wife who lives independently (which I have POA of her also).

By anon61181 — On Jan 18, 2010

There's a custodial account set up in my name by my father. How can I tell how and when I can take ownership of the monies?

By anon54996 — On Dec 03, 2009

Is it legal if the custodian removes money from a custodial mutual fund account for the purpose of paying off doctor bills and other various expenses "for the benefit of the minor" even though they do not directly benefit the minor?

By anon50856 — On Nov 01, 2009

I have opened a custodial account for each of my three grandchildren, without any permission from the parents.

By avedalet — On Jan 12, 2009

I have just closed a custodial account for my daughter. I am the custodian. I want to know if I am able to deposit the funds into my checking/savings account or are there any complications? Will I need to open a bank account with her name on it? Thanks for your help.

By anon16881 — On Aug 17, 2008

My question is this, can my inlaws without my wife's or my own permission open up a custodial account for my son, with money raised from a benefit for our financial burden due to my son having cancer, and not have to hand the money over to us? Let me explain: My child was diagnosed with lymphoblastic lymphoma (Cancer of the lymphnodes). My wife's mother and husband held a benefit for the financial duress our family was suffering due to my sons illness. The company i work for paid all my sons medical bills, which my inlaws knew about, but due to me having to take huge amounts of unpaid family medical leave i lost a considerable amount of salary. This was the purpose of the benefit. Well the benefit was held and a week went by with no contact from my mother in law regarding how much was raised. my wife called her and she told us $6,000 was raised. Simple math made that number way too low for the number of people in attendance and the amount of the tickets. it should have been at least 3 times that amount. i contacted my mother in law and in a discreet way said we would need an accounting of the funds as we felt a mistake was made in the total. She went into defense mode like a person guilty of something, so i had to contact an attorney. After our attorney contacted them which was 3 months after the benefit, they obtained an attorney and he informed my attorney that there was $12,000 dollars (double the amount she first claimed but still lower then what it should have been) in a custodial account in my inlaws names as custodian for my son. this account was only opened after i hired a lawyer a good 3 months after the benefit. Short of having to pay this attorney to take this to court, is this legal what they did as they are not custodian or guardian of my child. any help would be appreciated on this one.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-a-custodial-account.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.