September 23, 2013   Estate Planning

Serving as Custodian for a Minor Child's Account


Serving as Custodian A custodial account holds assets for a minor until he or she reaches a specified age and receives the assets. From the inception of the account, the child is the legal owner. Although the child cannot control the assets, the donor cannot take the assets back for any reason. If the assets make income such as interest or dividends, the amount of the income is to be taxed as income to the minor.
 
A parent, guardian, or other adult can serve as the custodian of the minor’s account. The role of the custodian is to manage the assets for the benefit of the minor. This management may include buying, selling, and reinvesting the earnings of the account.
 
The custodian may also make withdrawals of some or all of the assets, if necessary for the benefit of the child. Of course, the custodian may not use the money for personal expenses unrelated to the child. If the custodian is also a parent, it is important to understand that paying family bills is not an appropriate use of the funds, although family bills may be considered to be related to the child.
 
If you are the parent or guardian of a child for whom you also serve as the custodian of his or her assets, consider speaking with an attorney to get guidance on appropriate use of the funds. It is sometimes difficult for parents or guardians to differentiate between the expenses that they are under legal obligation to cover (food, shelter), and those that would be an appropriate use of funds in the child’s custodial account.


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