How to Open a Custodial Brokerage Account for Kids
To open a custodial brokerage account for kids, an adult opens a UTMA or UGMA account in the child's name at a broker, provides the child's Social Security number and their own ID, and funds it. The account is legally the child's, but you manage the investments as custodian.
Most major brokers let you open one online in about 15 minutes with no minimum and no account fees. The catch worth knowing up front: your child takes full control at the age of majority, and you cannot take the money back.
This guide walks through each step, from what you need to the kiddie tax at the end.
What a custodial (UTMA/UGMA) brokerage account is
A custodial brokerage account is an investment account an adult opens and manages for a minor. The two types are UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act). You act as the custodian and pick the investments, but the assets legally belong to the child.
The key word is irrevocable. Once you put money in, it is a gift to the child and cannot be taken back or moved to another kid. That is different from a 529 or a parent-owned brokerage account, where you keep control.
UGMA holds financial assets only, such as cash, stocks, bonds, and funds. UTMA is broader and can also hold property like real estate. UTMA is the newer, more flexible statute and is available in nearly every state. For most families opening a brokerage account, the two work the same way. See our UTMA custodial account explained guide for the full breakdown.
What you need before you start
You can gather everything in a few minutes. To open the account you will need:
- The child's full legal name, date of birth, and Social Security number. - Your own government-issued ID and Social Security number, plus your address. - A funding source, usually a linked bank account for an electronic transfer.
The child's SSN matters because the account is reported under the child's tax ID, not yours. That is what triggers the kiddie tax rules on any investment gains, covered below.
You will also choose the age of majority for your state during signup, though this is usually fixed by law (often 18 or 21). Have your bank routing and account numbers ready so you can fund the account right away.
Choosing a broker
Most large brokers offer custodial accounts with no account fees, no minimum to open, and commission-free trades on stocks and ETFs. Firms like Fidelity, Schwab, and Vanguard all fit this description, and many banks and robo-advisors offer them too.
When you compare, look at four things:
- Cost: confirm zero account fees and commission-free ETF trades. - Minimums: many require $0 to open. - Investment choice: broad access to index funds and ETFs matters more than fancy tools. - Fractional shares: helpful when you are investing small amounts each month.
Any reputable, low-cost broker that offers custodial UTMA/UGMA accounts will do the job. Do not overthink the brand; the account type and low fees matter far more than the logo.
Opening the account: step by step
The online process is short. Here is the typical flow:
1. On the broker's site, choose to open a custodial or UTMA/UGMA account. 2. Enter your details as the custodian, then the child's details, including their SSN. 3. Select your state's age of majority if prompted. 4. Review and agree to the custodial agreement. 5. Link your bank account to fund it.
Approval is usually instant or within a business day. Once open, you buy investments inside the account the same way you would in your own brokerage account. Everything you buy is held for the child.
Funding the account and the gift-tax note
You fund a custodial account by transferring cash from your bank, then investing it. There is no annual contribution limit on the account itself. Anyone, such as grandparents or relatives, can contribute too.
Gifts do interact with the federal gift tax, though most families never owe it. For 2026 you can give up to $19,000 per child per year without any gift-tax paperwork, per the IRS gift tax rules. A married couple can give up to $38,000 combined to one child. Gifts above the annual exclusion only reduce your lifetime exemption; they rarely mean an actual tax bill.
Set up an automatic monthly transfer if you can. Small, steady contributions add up over many years of growth.
What to invest in
Because a custodial account is for a long time horizon, most families choose broad, low-cost investments. A total-market or S&P 500 index fund or ETF gives you wide diversification in a single holding.
The main tradeoff is taxes. Unlike a 529 or Roth IRA, gains here are taxable each year, so funds that spin off less taxable income (like broad index ETFs) are efficient choices.
Avoid frequent trading and individual-stock bets with a child's money. A simple index fund held for a decade or more usually beats a complicated portfolio. Try our investment calculator to see how monthly contributions could grow over time.
Taxes (kiddie tax) and the age-of-majority handover
A custodial account's investment gains are taxed under the kiddie tax, not at your rate for most of it. For 2025, the first $1,350 of a child's unearned income is tax-free, the next $1,350 is taxed at the child's rate, and unearned income above $2,700 is taxed at the parents' marginal rate, per IRS Topic 553. Most small accounts stay under these thresholds.
The bigger planning point is the handover. At the age of majority (18 to 21, depending on your state), the account becomes the child's outright. They can spend it on anything, and you lose all control. Plan for this: talk with your child about the money before that age, and do not assume it will go toward college.
One more tradeoff: for financial aid, a custodial account counts as the student's asset and is assessed at up to 20% on the FAFSA, a bigger aid hit than a parent-owned account. If college aid is your priority, weigh a 529 vs UTMA. To compare every option side by side, start with our pillar guide on the best investment account for kids.
Frequently asked questions
How do I open a custodial brokerage account for my child?
You open a custodial brokerage account by choosing a UTMA/UGMA account at a broker, entering your details and the child's Social Security number, agreeing to the custodial agreement, and linking a bank account to fund it. Most brokers finish approval online in minutes with no minimum.
What do I need to open a custodial account?
You need the child's full name, date of birth, and Social Security number, plus your own ID, Social Security number, and address, and a funding source such as a linked bank account. The child's SSN is required because the account is reported under their tax ID.
Can I take the money back out of a custodial account?
No, you cannot take the money back. A custodial account is an irrevocable gift to the child, so the assets legally belong to them. As custodian you can spend funds for the child's benefit, but you cannot reclaim the money or move it to another child.
When does my child get control of the account?
Your child gains full control at the age of majority, which is 18 to 21 depending on your state and the account's UTMA terms. At that point the account becomes theirs outright and they can use the money however they choose.
How is a custodial brokerage account taxed?
A custodial account is taxed under the kiddie tax on the child's unearned income. For 2025 the first $1,350 is tax-free, the next $1,350 is taxed at the child's rate, and income above $2,700 is taxed at the parents' marginal rate. See our kiddie tax guide for details.
Is a custodial account better than a 529 for college?
It depends on your goal. A custodial account offers full investment flexibility and any use of the money, but a 529 gives tax-free growth for education and a smaller financial-aid hit. Compare them in our 529 vs UTMA breakdown.
Sources
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