Custodial Accounts
What is a Custodial Account?
Custodial accounts are set up and controlled by an appointed adult for a minor. Assets placed in the account are considered an irrevocable gift and become the property of the child. The funds in the account remain in the trustee's name until the child reaches the age of majority. (This age depends on your state's law, so please check your state law governing custodial accounts.) At that time, the child takes full control of any assets in the account.
Tax Advantages
There are tax advantages to opening and funding a custodial account. Federal tax laws allow you to give up to $10,000 per individual each year without incurring gift tax. Additionally, the first $700 of income that the account generates is tax free. The next $700 to $1,400 of unearned income will be taxed at the child's rate which will most likely be lower than the tax rate of the custodian. Any income above $1,400 for a child under age 14 will be taxed at the adult's rate. Please consult with your tax advisor for specific tax implications.
One thing to keep in mind with custodial accounts is that educational financial aid can be impacted. The amount of funds in this account may limit the amount of financial aid the child can receive.
Setting up a custodial account:
It's simple to set up a custodial account with WFN at Siebert. Additionally, you can set up reoccurring transfers directly to the account. Simply fill out the new account application and direct transfer forms below.
To complete the account application form, make sure you have the following information:
The child's name, social security number and birth date
The account custodian's name, bank information and employment information
You can download and fill out the account application form below. When printing the application, please select "Fit to paper" to ensure the entire application prints out correctly.
Please make sure you complete the following on the application:
Check the box marked "custodian"
Complete your information under "Account Holder Name"
Complete the "Joint Account Holder Name" with the child's name and social security number
Make sure to sign the bottom of the application
Download account applications here:
New Account Application
New Account Application Key
Automatic Transfer of Funds
Download a free version of Adobe® Acrobat® Reader here.
