Best Brokers With Custodial Accounts 2025
Discover our top brokers with custodial accounts, where secure asset management meets financial control, providing peace of mind and a streamlined trading experience to safeguard your investments.
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1Firstrade is a US-based discount broker-dealer authorized by the SEC and a member of FINRA/SIPC. It offers welcome bonuses, advanced tools and apps, and commission-free trading. Firstrade Securities is a popular top online brokerage, and opening a new account is fast and simple.
Compare Brokers
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✓ | ✗ | $0 | $1 | ✗ | ✗ | SEC, FINRA | Stocks, ETFs, Options, Mutual Funds, Bonds, Cryptos, Fixed | TradingCentral | USD | ✗ | ✗ | ✗ | |
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Safety Comparison
Compare how safe the Best Brokers With Custodial Accounts 2025 are.
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Mobile Trading Comparison
Compare the mobile trading features of the Best Brokers With Custodial Accounts 2025.
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Comparison for Beginners
Compare how suitable the Best Brokers With Custodial Accounts 2025 are for beginners.
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Comparison for Advanced Traders
Compare how suitable the Best Brokers With Custodial Accounts 2025 are for advanced or professional traders.
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Accounts Comparison
Compare the trading accounts offered by Best Brokers With Custodial Accounts 2025.
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Detailed Rating Comparison
Compare how we rated the Best Brokers With Custodial Accounts 2025 in key areas.
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Fee and Cost Comparison
Compare the cost of trading with the Best Brokers With Custodial Accounts 2025.
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Why Trade With Firstrade?
Firstrade is ideal for beginners wanting to trade US stocks without commission fees. It offers plenty of free educational resources and high-quality research, including its new FirstradeGPT tool. Users also get trading ideas from Morningstar, Briefing.com, Zacks, and Benzinga.
Pros
- Trusted US-regulated broker, member of SIPC
- Improved stock trading features now include overnight trading and fractional shares.
- FirstradeGPT ranks among the initial brokers to offer AI-powered analysis.
Cons
- Over 90% of the evaluated options lack a demo or paper trading account.
- Visa card deposits and withdrawals are not accepted.
- Firstrade emphasizes stocks and lacks forex options, reducing diversification opportunities.
Filters
Understanding Custodial Accounts for Minors
Many adults decide to set up a custodial account for a child, often aiming to provide a better financial future for them. This guide explains what these accounts are, their advantages and disadvantages, and how to select a suitable broker. We also highlight some top brokers offering custodial accounts.
What is a Custodial Brokerage Account?
A custodial account is a financial account opened by an adult for someone under 18, usually a child or grandchild. These accounts require an adult, known as the custodian, to approve transactions. The custodian must make decisions in the best interest of the minor, often choosing low-risk investments to help the account grow over time. The account can also be a straightforward savings account without any investments.
How Do Custodial Brokerage Accounts Work?
Custodial accounts can be either savings or investment-focused and are offered by banks, mutual funds, or online brokerage firms. When the minor reaches adulthood, determined by the laws in their location, they gain full control of the account. Usually, the custodian manages the investments and can contribute funds, ensuring they are low-risk.
Most brokers with custodial accounts allow investing across various assets. However, risky investments like trading on margin or in futures are typically not permitted.
Types of Custodial Accounts
There are two main types of custodial accounts:
– The Uniform Gift to Minors Act (UGMA): Covers financial assets like stocks and bonds.
– The Uniform Transfers to Minors Act (UTMA): Includes assets like real estate and personal possessions, but is not available in South Carolina.
Both accounts are established in a minor’s name, with parents or guardians handling them until legal adulthood. Specifics like initial deposit, account balance, and interest rates are defined by the financial institution involved.
Custodial Accounts vs. College Savings Accounts & Trusts
Despite serving similar purposes, custodial accounts, college savings accounts, and trust funds differ:
– College Savings Accounts are designed for education, offering tax benefits but with restricted fund usage.
– Trust Funds are flexible, allowing gifts to individuals or organizations regardless of age, but setting them up can be complex.
– Custodial Accounts offer freedom for any benefit to the minor, although the assets can’t be reclaimed by the custodian and must stay with the named beneficiary.
Advantages of Custodial Accounts
Some perks of custodial accounts include:
Tax Advantages
Custodial accounts are taxed at the child’s rate, often leading to tax savings.
Flexible Spending
The money can be used for a range of needs, from education to daily necessities.
No Income & Contribution Limits
You can add any amount at any time, in one big lump or regularly in smaller amounts.
No Withdrawal Fees
You can withdraw funds without penalties when they’re needed for expenses benefiting the minor.
Drawbacks of Custodial Accounts
There are also some cons to consider:
Reduced Financial Eligibility
The funds count as assets for the child, affecting financial aid eligibility.
Irreversible Deposits
Funds can’t be taken back once deposited; they fully transfer to the minor upon adulthood.
Unchangeable Beneficiary
The beneficiary of a custodial account cannot be changed or transferred to others.
How to Choose Brokers for Custodial Accounts
Consider these factors when selecting a broker:
Reliability
Choose reputable and regulated brokers. Good customer service is essential for addressing concerns.
Fees
Look for brokers with low or no fees to maximize funds available for the minor. You might pay more if you want someone to manage the account, like a robo-advisor.
Variety of Assets
Ensure the broker offers a range of assets to create a balanced portfolio for the child’s future.
Setting Up a Custodial Account
After picking a broker, setting up an account is typically a smooth online process. You’ll need:
– Minor’s personal details (name, birth date, social security number)
– Your driver’s license information
– Your social security number
– Banking details
– Employer information
Investing in a Custodial Brokerage Account
When investing this account’s funds, aim for low-risk, long-term investments such as a mix of stable stocks, ETFs, or bonds. Be cautious with riskier investments and try balancing them with safer ones like gold or index funds.
Reviews: Top Brokers with Custodial Accounts
Some top brokers offering custodial accounts include:
Charles Schwab
– Offers a wide range of investment options with no fees
– Fractional shares available
– 24/7 customer service
Vanguard
– Access to both passive and actively managed accounts
– No transaction fees
– Educational support for decisions
Fidelity
– No management fees
– $50 reward when the beneficiary opens a Youth Account
– 24/7 customer support and educational resources
Conclusion on Brokers with Custodial Accounts
Custodial accounts provide adults a way to manage savings for a child until they reach adulthood, along with potential tax benefits. However, these accounts can impact financial aid eligibility. Ensure you choose a reputable broker to secure these advantages for the minor’s future.
FAQs
How Do Brokers with Custodial Accounts Work?
Custodial accounts are set up by an adult who approves all fund-related decisions. The child takes control upon reaching adulthood.
Can You Take Money From a Custodial Account?
Yes, funds can be withdrawn if they benefit the child, such as education or living expenses.
What Happens When the Beneficiary Turns 18?
The child gains full control of the account at the legal adulthood age.
How Can I Open a Custodial Account?
An adult must open the account. They manage it until the child turns legal age, when control shifts to the child.
What Is the Taxation of Brokers with Custodial Accounts?
In the US, the first $1,100 of income is tax-free, with additional amounts taxed at different rates.