What is a Loved Custodial Account?

By The Loved Investing Team December 30, 2018

What is a Loved Custodial Account?

Overview

  • Custodial accounts help you plan and achieve for your child's future.
  • Custodial accounts can be used in any way you wish for your child.
  • When the child reaches adulthood, they can use it however they wish.

As parents, we all want to be doing the best for our kids. Getting started saving and investing for your kids early is one of the best things you can do for them. Your kids will certainly be thanking you when they realize the extra opportunities you were able to unlock by investing early.

For those parents that want to get started investing for your kids, it can be confusing and we want to be with you in providing the right information. We're going to explain custodial accounts which is the Loved Investing's account option.

What's a Loved account? Loved is a Custodial Account!

A custodial account is a type of account that allows a minor to own investments before they are an adult. An adult opens the account on the minor's behalf and controls it until they reach the age of majority. The age of majority is the age at which the child becomes an adult, 18 or 21 depending on their particular state.

Loved Investing's custodial account is designed with flexible investment options and a number of tax advantages. It gives you the choice to save and invest for any expense in their future, and at the same time choose investments in things you're familiar with - think Apple, Disney and Facebook - Warren Buffett's Berkshire Hathaway or Tech companies. There's many options for you and the child to choose from.</p>

Custodial accounts can also be called Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) accounts. UTMAs are the ones we use with Loved because they allow more flexible investment options than a UGMA, providing the most benefit to Loved kids.</p>

You Can Open a Custodial Account with Loved Today

Whilst banks and brokerage companies usually offer custodial accounts, you can open one right away with Loved. Anyone over 18 can open a custodial account for a child - whether that's a parent, uncle, aunt or grandparent. At this point in time, you'll need to be the custodian of the account to deposit funds into the account.

Tax Considerations

Custodial Accounts get to take advantage of the zero tax rate on your child's first $1,050 of unearned income. After that they get a reduced tax rate up to $2,100, after which they're taxed at the custodian's tax rate.

529 accounts

  • 529s are named after the Internal Revenue Code 529, and are a type of fund to save for kids education costs.</li>
  • The accounts are owned by the account creator, and are not designated specifically for the child even though it may be.</li>
  • 529s, like other assets including custodial accounts, may impact your child's financial aid.</li>
  • Income and capital gains in a 529 grow tax-free although if the money isn't used for a child's education, you'll end up with a 10% penalty plus the missed taxes.

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