Custodial Accounts

Custodial Accounts

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Custodial Accounts

Custodial Accounts definition:  Custodial accounts are established for minors  to transfer assets when the minor reaches legal age (age 18, 21, or even 25 depending on the state of residence), whether the parent is alive or deceased. Parents are not permitted to use custodial accounts to pay for their parental obligations of food, clothing, and shelter. However, other guardians may use the account funds for these purposes after the parents are deceased. Custodial accounts are included in the custodian’s taxable estate if the minor has not yet become a legal adult and assumed full control of the assets.  Custodial accounts are not subject to probate. Custodial accounts are generally irrevocable, and no alternate beneficiaries may be designated. If a child dies, the donor has no control over how assets are distributed.  The donor is responsible for income taxes on custodial accounts.

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