In this blog we are going to tell you about Custodial Account on Robin Hood, so read this blog carefully to get the complete information.
What is a Custodial Account?
A custodial account is a type of savings or investment account which is opened by an adult for a minor. It sets aside money that the child can use later on. Sometimes, parents or grandparents want to begin saving and investing for the future of their child but the beneficiary is not old enough to handle the account. In this case, a custodial account comes handy and when the beneficiary reaches a certain age, he/she gets control of the account. The best thing about a custodial account is that it can hold a lot more than cash. If you are a parent and want to contribute cash, insurance policies, investments and physical assets such as real estate then a custodial account for you is a good option.
Advantages of a Custodial Account
Custodial Account is basically utilized by the parents and grandparents who pass money to kids for purposes of paying for college or using as they like when they reach adulthood. There are certain benefits of using the Custodial Account:
- The major advantage of a custodial account is that there are no limits to the amount that someone can contribute to or withdraw from the account.
- There are no requirements to what the child must spend the money on in the future.
- Children can spend the money on whatever they want once they reach the required age.
Types of custodial accounts
There are two different types of custodial accounts and the major difference comes down to what type of assets you can contribute to the minors. The custodial accounts are based on:
- Uniform Gift to Minors Act (UGMA) Account – A UGMA account is a custodial account where the account holder can contribute cash, insurance policies, securities (financial items such as stocks and bonds) and protection approaches.
- Uniform Transfer to Minors Act (UTMA) Account – A UTMA account is a custodial account where the account holder can contribute any type of investment. Same as the UGMA account, the owner can contribute cash, investments as well as physical assets such as real estate.
How does a custodial account work?
A custodial account is just like a savings or investment account that an adult opens for a child. In the custodial account, the adult transfers assets such as cash and investments and once the money goes into the account, it belongs to the child. The assets and cash can be contributed over the years. When the child reaches maturity, he/she gains control over the account and can leave the money in the account or withdraw it.
Whom does a custodial account belong?
When it comes to the ownership of a custodial account, it depends on many perspectives. Once assets go into a custodial account, they belong to the child who is the holder of the account. It is important to note that the adult who opened the account cannot take any money or other assets out of the account. The only thing is that the child does not have control of the account until they reach age 18 or 21. The adult who opened the account has control of it until the child reaches the maturity age.
Final words
A custodial account is a tax-advantaged account that adults can open to transfer money and other assets to the children when they reach adulthood. If you want to set up a custodial account for your child’s college education or even just set aside money as a gift for when they reach adulthood, start thinking about opening a custodial account.
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Conclusion
We Hope this blog is sufficient enough to provide the information about Custodial Account on Robin Hood. Thanks for reading this blog.