accounts are established under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) and provide a way for you to make a financial gift to children, whether they are your own, a relative’s, or a friend’s.
Although custodial accounts offer investment flexibility, a 529 plan offers tax advantages and other benefits specifically for college savings.
Schwab One Custodial Account features:
No gift tax incurred for contributions up to $13,000 ($26,000 per couple) for each beneficiary in a single year.
No contribution limits.
Adult manages the account, while the assets are considered an irrevocable gift and immediately become the property of the child. Generally, the account must be turned over to the child at age 18 or 21 (depending on the state).
Potentially limiting to financial aid for the child's education, depending on the amount of funds in the account.
Withdrawals can be made at any time and for any purpose for the benefit of the beneficiary.
Please note that all assets are held in the child’s name, and are currently assessed at 20% for financial aid.
1. full-time college students under the age of 24 will also be taxed at their parents' rate on unearned income in excess of $1,900 amount, unless the students' earned income is greater than one-half of their support.
Investors should consult their own tax and investment advisors about their specific situation prior to taking action. We believe the information provided is reliable, but Charles Schwab & Co., Inc. and its affiliates do not guarantee its accuracy, timeliness or completeness.
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