Custodial Account

Custodial Account

A custodial account is a financial account set up to hold and manage Assets on behalf of a minor or an individual who is unable to manage their own finances. The account is managed by a custodian, usually a parent or guardian, until the account holder reaches a specified age, often 18 or 21, at which point they gain control of the Assets.

Examples:

• A 15-year-old has a custodial account established by their parents to save for college expenses, with the parents managing the investments until the child turns 18.
• A grandparent opens a custodial account for their grandchild, contributing Money regularly as part of a gift to be used for future educational costs.

Cases:

• In a situation where a minor receives a cash settlement from a lawsuit, the funds may be placed in a custodial account to ensure proper management until the child is of age.
• A parent uses a custodial account to teach their child about Investing, allowing them to make decisions on investments as they grow older, under the parent’s Guidance.