How to Open a Custodial Account at Charles Schwab

Custodial accounts are a powerful financial tool for parents who want to help their children get started on the path to financial success. It enables parents, or other adults, to open up an account on behalf of a child and start investing on behalf of a child at an early age. There are many benefits to opening a custodial account for a child, including financial education opportunities and tax benefits. But, how do you actually open up a custodial account for a child? In this blog post, we’ll review how to open up a custodial account for a child at Charles Schwab.

What is a Custodial Account?

A custodial account is a financial account that is managed by an adult on behalf of a minor, typically a child under the age of 18 or 21 (depending on the state). The adult who manages the account is known as the custodian, and they have the legal authority to manage the funds and investments in the account until the minor reaches the age of majority. Once the minor reaches the age of majority, the funds in the custodial account are legally theirs to control and use as they see fit.

Custodial accounts can be opened at banks, brokerage firms, or other financial institutions, and can hold a variety of assets such as cash, stocks, bonds, and mutual funds. The custodian is responsible for making investment decisions on behalf the minor.

How to Open a Custodial Account at Charles Schwab

To open a custodial account at Charles Schwab, you can follow these steps:

1. Visit the Charles Schwab website and click on the “Open an Account” button.
2. Select “Brokerage Account” as the account type, then scroll down to “Additional Accounts” at the very bottom of the page
3. Under the Educational and Custodial box, select “Custodial Account”
4. This next screen tells you it will take about 10 minutes and you’ll need: U.S. permanent resident address for yourself and the minor, a Social Security Number or Tax Identification Number for yourself and the minor, Employer’s name and mailing address (if applicable) for yourself and the minor.
5. Fill in your personal information – if you have an account most of your information will already be pre-populated.
6. Verify your mailing address.
7. Provide your employment and financials. This will also be pre-populated if you already have an account with Charles Schwab.
8. Answer the standard financial questions such as do you own 10% or more of a public company.
9. Provide the minor’s information including name, date of birth and social security number.
10. Provide the minor’s legal address and phone number – you can click the checkbox up at the top to use the same address and phone number as yours.
11. Provide the minor’s employment status and financial net worth. There is an option to say “not employed” and you can also can put $0 salary and $0 net worth.
12. A screen asking about the state and the age of termination will pop up. Based on the state, the age of termination options will change. For example, some states are age 18, some are age 21, some offer both options and some states offer other ages. You are able to select the age here, and it will tell you what year that is.
13. A screen asks about additional details for the minor, the standard financial questions like if they own 10% of a company.
14. Select what the source of funds will be for this account and the primary purpose of this account.
15. Select if you want checks, options trading and if you want to go paperless.
16. Consent to the terms and conditions and hit submit.
17. The application for a custodial account has now been submitted and you wait for approval or get started on funding the account.

Keep in mind that specific requirements and procedures may vary depending on the state you reside in and the type of custodial account you want to open.

How Do You Transfer Ownership Of A Custodial Account To The Child?

When the child reaches the age of majority, the custodial account will need to be transferred to the child. The account can be transferred into their name only with custodian consent. To do this transfer, contact Charles Schwab, or the brokerage holding the account.

Have you opened a custodial account for your child? What was your experience like?