A custodial account is a very popular term. Many people open this account to ensure their child’s future. This account helps us to secure our future. That is why parents feel relax about their child’s future.
Definition and types of Custodial Account:
A custodial account refers to a financial account where guardian store their money or assets for their future generation. This account is a savings account, financial institutions or fund company. This is a financial platform where parents or guardian save their money for their child so that their children can decorate his or her future life easily. He or she can use these assets when he or she becomes an adult. a custodial account is opened for the benefit of another person. This account is in one person’s name but it controlled by another person. You can create this account as a student, teacher or parent. Many parents want to open this account and save money for higher education. You can teach your children about the basics of investing by opening this account.
Types of Custodial Account:
If you want to open a custodial account for your child, you have to open the right type of account according to your specific financial situation and goals. It is a very important task for you. There are two kinds of a custodial account. One is Uniform Transfers to Minor Act and another is a Uniform Gift to Minor Act. Short forms are UTMA and UGMA. You can contribute any kind of asset to the UTMA account. This account includes some assets that you could not expect. Such as- real state and artworks. There are no limits for UTMA account, you have no limit on how much you can save for your child. You can transfer your assets to the minor very simply. UTMA account considers the age of 21. UGMA account is not flexible as UTMA account. You can not contribute any kind of asset to this type of account. UGMA account depends on the assets to cash, different types of securities and insurance policies. Higher-risk investments are not permitted to this account. Stock options are not permitted too. UGMA account considers the age of 18. You can open UGMA account from all states in the U.S.
Opening a custodial account is very simple than opening a trust. You can open your custodial account either in-person or online. You have to provide some information. Such as social security number, contact number, personal information, etc. There are many kinds of custodial accounts. Like- Charles Schwab, Ally Bank, ID Ameritrade, stockpile, Vanguard, etc. You can use from them with an opening fee or without an opening fee. Some of them give you free service. On the other hand, you get a free service from them. But you won’t need to pay an expensive amount. You can get service with a low-cost amount. So, don’t worry about it. When you open your account, you have to transfer your assets into the account. Then the investment manager will decide how to invest your assets and grow the account. You can manage and utilize your account.
A custodial account is a very essential account for us. We save our money by this account and this account saves our time and effort. So, I think the custodial account is the best choice for you.