Fidelity Investments Custodial Account Guide for Guardians and Parents

As a guardian or parent, managing a child's financial future can be a daunting task. Fidelity Investments offers a Custodial Account that helps you save and invest for their benefit.

The minimum opening balance for a Fidelity Custodial Account is $100. This is a relatively low threshold, making it accessible to many families.

Fidelity Custodial Accounts are subject to certain rules and restrictions. For example, the account must be in the child's name, and the guardian or parent must be the custodian until the child reaches the age of majority, which varies by state.

You can open a Fidelity Custodial Account online or by phone, and it's free to do so.

Additional reading: Instacart Parent Company

A custodial account is a convenient and tax-efficient way to manage and grow a child's money, allowing parents or guardians to invest on behalf of their children with the assets irrevocably belonging to the child.

Custodial accounts, such as UGMA and UTMA accounts, are taxable investment accounts with no contribution limits, making them valuable gift opportunities for major milestones and celebrations. Anyone can contribute to a custodial account, including parents, grandparents, friends, and other family members.

A portion of any earnings from a custodial account may be exempt from federal income tax, up to $1,250 in 2024, and any earnings in excess of that amount may be taxed at the child's tax rate, which is generally lower than the parent's tax rate.

You can transfer existing shares of stocks, mutual funds, or other securities from your own account into a custodial account, and the account will be restricted once the child passes the state-mandated age and control has not been transferred.

Opening a custodial account with Fidelity is a great way to plan for a child's future, as it allows you to save and invest on their behalf.

Fidelity custodial accounts are designed to help you do just that, with a range of investment options available to suit your goals.

You can start by opening a custodial account online or by phone, and then fund it with a lump sum or set up automatic transfers from your checking account.

Once the account is open, you can manage it online or through the Fidelity mobile app, making it easy to keep track of your investments and make changes as needed.

A custodial account can be a great way to save on a child's behalf, or to give a financial gift.

There are no income or contribution limits on these accounts.

These accounts are easy to open and can be used to invest in a variety of assets, including stocks, bonds, and mutual funds.

With a custodial account, you can save and invest on a child's behalf, giving them a better future.

These accounts have no early-withdrawal penalties or restrictions on how the funds are used for the child.

Additional reading: Save Hank and Helen's Home Gofundme

To open a custodial account, you'll need to choose a financial institution that offers this type of account.

The minimum age requirement for a custodial account is typically 18 years old, but some states allow minors to open their own accounts at a younger age, such as 17.

To open the account, you'll need to provide identification and proof of address for both you and the minor beneficiary.

The custodial account must be opened in the name of the minor, with you or another adult as the custodian.

The custodian has the authority to manage the account until the minor reaches the age of majority, which is typically 18 or 21 years old, depending on the state.

You can choose the beneficiary, but in many cases, the beneficiary is the minor child opening the account.

The account can be opened online, by phone, or in person, depending on the financial institution's policies.

Check this out: Actuarial Science Minor Uf

Transferring ownership and custody of a Fidelity investments custodial account is a relatively straightforward process that can be completed in a few ways. The first step is to start the transfer process by the custodian, which will create a new brokerage account for the beneficiary to receive the account assets.

A brokerage account is a taxable investment account that allows you to buy stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other types of securities. You can learn more about brokerage accounts at Fidelity's website.

To transfer the custodial account, the beneficiary will need to open a new Fidelity brokerage account, which can be done quickly over the phone or online. Once they have their new account number, the custodian can request the transfer, which can be done in just 2 steps.

The transfer can be done in-kind, without selling investments, between the custodial account and the new brokerage account. If the new account owner wants the custodian to continue managing investments, they can add them as an authorized user on the account.

Alternatively, the custodian can complete the change of account registration form, which involves filling out information about the owner and an e-signature from the beneficiary. This process takes around 5 to 7 business days to complete.

There are 4 levels of access that the custodian can have on the new account, including inquiry, limited, full trading authority, and power of attorney. The new account will be opened and the assets transferred within 5 to 7 business days of completing the form.

Here are the 3 ways to transfer a custodial account to the new owner at Fidelity:

It's worth noting that selling investments to generate cash could generate capital gains or losses for the beneficiary, since they are the owner of assets.

UGMA/UTMA brokerage accounts can make sense when saving and investing on behalf of a child, but there are some important things to know about the accounts.

Money put into a custodial account belongs to the child – it's called an irrevocable gift. This means the child gets full control of the money at a certain age, which varies by state.

The gift tax may be a consideration, especially if you're planning to give a large amount to a child. Beginning on January 1, 2024, an individual may make gifts in an amount up to $18,000 annually to any recipient without making a taxable gift.

Earnings on the account are subject to taxes, and income from investments is considered unearned income by the IRS. This means you'll need to report it on your tax return.

If the child's unearned income exceeds $2,500, it's taxed at the parent's rate in 2023. This can be a significant consideration when planning for a child's financial future.

For more insights, see: Notional Amount

Once the assets are transferred to the child, they can use them for any purpose. This lack of control can be a drawback for parents who want to ensure the money is used for education or other specific goals.

Financial aid can be adversely affected by custodial accounts, as they're considered assets owned by the child. This can impact eligibility for financial aid and scholarships.

Broaden your view: Rite Aid

You can use a custodial account to educate a child about saving and investing by explaining that the money belongs to them and you're saving and investing for them until they reach adulthood.

Anyone can contribute to a custodial account, including parents, grandparents, friends, and other family members, with no contribution limits. In fact, individuals can contribute up to $19,000 free of gift tax in 2025, or $38,000 for a married couple.

You can open a custodial account with no minimum, though certain investments may require a minimum initial investment.

Here are some key facts to keep in mind:

Investing with a custodial account can be a valuable way to educate children about saving and investing, and it's worth considering the plan's investment objectives, risks, charges, and expenses before investing.

You can use a custodial account to help educate a child about saving and investing by explaining that the money belongs to them and that you're saving and investing for them until they reach adulthood.

Anyone can contribute to a custodial account, including parents, grandparents, friends, and other family members, with no contribution limits.

You can contribute up to $19,000 to a custodial account in 2025, or $38,000 for a married couple, without incurring gift tax.

There's no minimum to open a custodial account, although certain investments may require a minimum initial investment.

By showing a child the investment mix, types of assets, and performance reports, you can educate them about investing until the account becomes theirs.

When managing your wealth, it's essential to consider the plan's investment objectives, risks, charges, and expenses before investing.

Fidelity Wealth Management advises taking the time to carefully review these factors to ensure you're making an informed decision.

Investing in a 529 college savings plan can be a great way to save for education expenses, but it's crucial to understand the plan's specifics, such as fees and investment options.

Before investing in a 529 plan, contact Fidelity for a free Fact Kit or view one online to get a better understanding of how the plan works.

Options trading can be a complex and high-risk strategy, and it's not suitable for all investors.

Some options strategies carry additional risk, so it's essential to educate yourself on the potential consequences before getting involved.

Investing in any financial product, including 529 plans and options, involves risk, including the risk of loss.

Tax laws and regulations are complex and subject to change, which can significantly impact investment results.

Consult an attorney or tax professional to get specific advice on your situation.

Here are some key points to consider when managing your wealth:

A custodial account with Fidelity Investments can be a great way to save for a child's future, with no fees for accounts with a balance of $10 or less.

You can open a custodial account with as little as $10, making it an accessible option for parents.

Fidelity Investments offers a range of investment options, including index funds and ETFs, which can be a good choice for long-term savings.

It's essential to consider the tax implications of custodial accounts, as earnings are taxed at the child's tax rate, which may be higher than the parent's rate.

Fidelity Investments provides a variety of tools and resources to help you manage your custodial account, including online statements and tax documents.

You can also transfer funds from one Fidelity account to another, making it easy to consolidate your savings.

A custodial account with Fidelity Investments can be a good option for parents who want to save for a child's education expenses.

See what others are reading: How Long Should U Keep Bank Statements