What Is a Custodial Investment Account?
A custodial investment account is an investment account that is set up by a legal adult on behalf of a child.
What Types of Custodial Investment Accounts Are There?
“Custodial investment account” is a category rather than a specific account type.
There are actually several different types of custodial accounts.
The main options include:
UGMA/UTMA accounts: General-purpose investment accounts
529 accounts: College savings accounts
Coverdell ESA: College savings accounts
Custodial retirement accounts: Retirement savings accounts (for children with earned income)
Each account style has the same basic operation: A custodian (adult) opens the account and manages it, and the beneficiary (child) gains control once they become an adult.
Beyond the basics, these accounts can be fairly different in tax treatment and the purpose of the funds in the account. Here’s a more detailed explanation of each custodial account style.nm