Withdrawing from your Custodial Portfolio (2024)

FAQs

What happens if you withdraw from a custodial account? ›

Also, there are no withdrawal penalties. While all withdrawn funds are restricted to being used "for the benefit of the minor," this requirement is vague and isn't limited to educational costs, as with college savings plans.

Making a withdrawal from a Custodial account

Wait up to an additional five days for any recent deposits on hold to become available to withdraw. After the sale has settled, contact us to make the withdrawal at 800-205-5164 from 8:00 a.m.-8:00 p.m. ET Monday-Friday, or email us at [email protected].

UTMA accounts have no withdrawal limits. However, UTMA withdrawal rules set out that the funds belong to the minor from the moment of transfer, so the funds can only be used for the direct benefit of the minor.

The minor owns the funds in the account. The adult, as the custodian, has exclusive control of the account and the minor cannot make deposits, withdrawals or transact on the account. If there's more than one adult as the custodian on the account, each may act independently.

Assets and income in a custodial account belong to the minor beneficiary (the child). Minors with unearned income such as interest, dividends, and capital gains, generally have to file an income tax return if, among other things, their unearned income is over $1,300 (in 2024).

The drawbacks: You can't change the beneficiary of a custodial account once it's established. Your child can use the money however they want after reaching a certain age, and investment income in custodial accounts may trigger the kiddie tax. The account can impact financial aid eligibility.

Bottom line. A custodial account is a great way to give minors cash, securities and other investments. That said, keep in mind the tax and financial aid implications and the fact that withdrawals must be used for the benefit of the minor.

When the custodianship ends, the account holder (formerly a child, now legally an adult) will have complete control over the account, and the custodian's access to the account may be restricted.

Withdrawing money from your Smart Portfolio works the same way as withdrawing from any other Stash portfolio. It can be done in the app or online. When you withdraw funds, you can choose to transfer them to your Stash banking account or your external bank account.

As a parent or custodian, you're not legally responsible for paying taxes on your child's UTMA account. The tax obligation lies with the child. However, considering the difficulty of filing taxes, it's likely that as the parent or custodian you will help handle filing and paying any taxes due.

Who pays taxes on a custodial account? ›

How Do Taxes Work with a Custodial Account? The child beneficiary technically owns the custodial account — not the custodian. It's the beneficiary's Social Security number that is attached to the account. Thus, the child is the one who technically needs to pay taxes.

What Expenditures Are Proper? Can I use the account to buy a car for my child? Or to send the child to private school? Yes, you are allowed to use UTMA accounts for items included in a support obligation, regardless of what you read elsewhere.

While you can technically withdraw money from a custodial account before your child reaches the age of majority, you can only do so for the direct benefit of the child. That means any purchases must be to help your child, like buying new school clothes or braces.

Unfortunately, a UTMA is an irrevocable account and legally belongs to your child. This means you cannot simply terminate it like you would a living trust or your own accounts.

Depending on the state, a UTMA account is handed over to a child when they reach either age 18 or age 21. In some jurisdictions, at age 18 a UTMA account can only be handed over with the custodian's permission, and at 21 is transferred automatically.

Between the age of 18 and 25 (it varies by state) legal control of the account must be turned over to the child, who can then use the money for any purpose they choose.

Opening a custodial account for the child in your life can be an excellent way to set them up for future financial success. But, as with anything related to money, you must consider the tax consequences. You may owe taxes at both your rate and the child's, and they might even have to file a tax return.

However, there are many accounts held on behalf of children with one of their parents as trustee. Here, providing the trustee can prove they are using the monies for the benefit of the child, they can withdraw funds from the child's account.

Yes - as long as it is still in trust for child.