Custodial accounts let parents, grandparents, and others invest funds for a minor. The accounts offer potential tax benefits and the flexibility to use funds for educational or non-educational expenses.
What is a custodial account?
An account where an adult serves as custodian and holds supervisory powers over the investments. The account will conform to Uniform Gift to Minors Act (UTMA) or the Uniform Transfer to Minors Act (UTMA) rules depending on the state statutes.
Income eligibility restrictions
None
Contribution age limits
Generally up to age of termination (18 – 21) depending on state rules
Maximum yearly contribution per minor
No limit. Donor can gift up to $17,000 ($34,000 for married couples who file jointly) without incurring gift-tax implications.
Minimum initial investment
Varies by account
Taxation of earnings and withdrawals
Earnings are taxable to the minor and could be subject to higher tax rates
Qualified withdrawals
Funds can be used at any time but only for the benefit of the minor. Subject to state law.
Penalties for nonqualified withdrawals
Not applicable
Ownership of assets (for financial aid)
The assets and any income generated in the custodial account are the student's for financial aid purposes
Commissions and fees
Vary by account
Need advice? Ready to open a custodial account?
Call our toll-free number 1-866-243-0931
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Investment and Insurance Products are:
- Not Insured by the FDIC or Any Federal Government Agency
- Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
- Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
For children younger than age 19 (or 24 for a full-time student), the "kiddie tax" rules may be applicable. If applicable, the minor's unearned income from the custodial account may be taxed at the higher of the parent's marginal tax rate or the child's tax rate. Discuss these rules with your tax advisor to determine if they are applicable to your specific tax situation.
WellsTrade® and Intuitive Investor® accounts are offered through WFCS.
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