Once the child formally becomes an adult in the eyes of the law, the account goes under their control. Still, the account is considered to be an asset owned by the child, according to Fidelity Investments. In a custodial account, parents, grandparents or other adults can make the investment decisions in the account. Custodial accounts can be good options to transfer wealth for just about anything else,” wrote Richard Polimeni, director of Bank of America’s Education Savings Programs. “If your primary goal is to invest for education, 529 plans offer the greatest tax advantages, control and flexibility.
Distributions are not subject to federal income tax and state income tax (in most states) when used for specified educational purposes.Ĭustodial accounts do not have those tax advantages on school-related use. Custodial accounts are not 529 accountsĪ 529 account comes with special tax advantages geared towards schooling.
… I don’t think it’s a good idea for financial purposes or education purposes,” he said. “This is not an account to bet in, this is an account to take care of the child. Joshua Mungavin, principal and wealth manager at Evensky & Katz, is not a fan of a custodial account devoted to stock picks, especially when it’s a new stock freshly hitting public markets. But beware of the tax consequences that lurk - not to mention the weird family dynamics and resentments that can bubble up if investments go wrong. Those accounts enable parents to buy stocks, bonds, mutual funds and other assets on their child’s behalf. Or, they could use a custodial trading account to do it. Those parents could buy a share in their own brokerage account. So maybe now your kid wants to play Roblox on the stock market too.Īt a time when more people are getting into the stock market - for better or for worse - parents might be more inclined to say ‘yes’ to the idea. Shares obtained a $45 reference price on Tuesday. Roblox began trading on the New York Stock Exchange on Wednesday.
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