What are the limitations of a custodial investment account?
I am 17, and I want to open a Custodial Account for stock investment. Can my own bank account be used for this, or does it have to be my parent's bank account , and then when I turn 18 they give me the earnings. How does it all work?
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Answer by JPInvestor
A custodial account is one in which the minor (you) is the owner of the money and investments but an adult (parent) signs all of the paperwork and makes all of the decisions. It is typically set up as: PARENT NAME as custodian for YOUR NAME.
You can do all of the research and choose your investments, but the final say has to go through the custodian on the account. Depending on your state, when you reach 18 (or 21 or some other age), the account can then be retitled into your own name.
You should probably set up an UTMA account through an online broker (TD Ameritrade, E*Trade, etc). A parent could be the custodian and sign the documents, but you could log into the account and utilize the research, trade (with your parent), etc.
You can usually call the online broker and they can tell you the requirements for setting up the account.
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