Custodial Accounts (UTMA/UGMA)
01.Investing for Kids Without Jobs
What if a kid doesn't have earned income, but parents or grandparents want to gift them money to invest? They can use a Custodial Account (often called UTMA or UGMA). These are normal investment accounts held in the child's name, managed by an adult until the child turns 18 or 21.
02.Kiddie Tax Rules
Custodial accounts aren't completely tax-free, but they are taxed at the child's low tax rate instead of the parent's high tax rate. This saves families money while helping kids build a stock portfolio.
03.Ownership Transfer
Once the kid reaches the age of majority (18 or 21 depending on the state), the account transfers completely to their control. They can use it to buy a car, start a business, or keep investing for the future.