Custodial Account Question

[Anonymous]

We started custodial accounts when our kids were born. The original thought was give it to the kids after college graduation, they could use for grad school, down-payment for a house or some other big need.

Well, oldest is now 20, and we are rethinking our original decision. Because when she turns 21, the $$ becomes hers. And it's a lot of money (around $100k). It was our money we put in the account, and yeah, we want to control how it's spent.

I've been transferred to so many different people, and spent so much time on hold at Vanguard, I'm hoping someone here can help, because I don't have another hour to spend on hold, being transferred, and explaining again.

Is there a way to undo the custodial part and just have the money in my name? It's not an IRA, just a regular brokerage account. And what do I need to ask for at Vanguard the first time, so that they stop transferring me around workout anyone actually helping me. TIA

[Anonymous]

Does your DD know that you are trying to do this? Is she okay with that? Money turns over at 21 and not 18?

[Anonymous]

I’m sorry to tell you but there is no way to undo your decision. Putting money into a custodial account means you’re signing up to transfer that money to your adult child when they come of age. Now would be a good time to educate your daughter about financial planning and success

[Anonymous]

The age depends on the state. Some states are 18 and some are 21

[Anonymous]

With Vanguard age is 18. That train has left the station OP.

[Anonymous]

I have custodial accounts for my nephews and the money in those accounts become theirs when they turn 18 (I’m in a Virginia). Depending on how those accounts were set up they may just refer to their names at whatever age the state you’re in determines.

Hopefully your kids are mature enough to have a conversation with them. My son was absolutely blown away by a compound interest calculator.

[Anonymous]

OP, I hope you are not talking about changing the ownership without letting your daughter know.

[Anonymous]

Anonymous wrote:I have custodial accounts for my nephews and the money in those accounts become theirs when they turn 18 (I’m in a Virginia). Depending on how those accounts were set up they may just refer to their names at whatever age the state you’re in determines.

Hopefully your kids are mature enough to have a conversation with them. My son was absolutely blown away by a compound interest calculator.

Virginia allows you to defer to 21 or 25.

https://www.policygenius.com/estate-planning/age-of-majority-by-state/

[Anonymous]

Does your daughter know about the account? If not, I wonder what obligation you have to tell her it exists?

[Anonymous]

Anonymous wrote:Does your daughter know about the account? If not, I wonder what obligation you have to tell her it exists?

You are obligated to tell them it exists. The bank that held our kids' custodial accounts in MD required us to turn the accounts over to the child at age 21. The kids needed to sign paperwork for their new independent accounts, plus be accountable to the IRS for any earnings.

[Anonymous]

May or may not have been a custodial account, but my husband had funds in an account that his grandparents funded for his education. At 21, his father strongly suggested he sign over temporary control of the account back to him [his father] with the eye towards "you'll use it for grad school." My partner did that easily (needed to go get something notarized). He had a high level of trust with his parents, and his parents did have a high level of trust with him, but I can tell you we would have spent that money on living expenses if we didn't sign it back over.

[Anonymous]

We turned over accounts of $300k-500k to each kid when they turned 21 (we were allowed to opt 21 vs 18). However they know that money is for financial security later in life, not to go out and buy a sports car or something. It helped a lot when they were applying for rentals out of college as they looked like a good risk. They’ve also seen how money well invested can grow and are motivated to continue maxing out 401k etc. I guess my point is to teach them how to handle it.

[Anonymous]

Op can you ask/tell your daughter that you would like your name added as a joint owner the same time the account transitions to her from the custodial title?

Technically she could say no, as the money is hers. But many kids would not only be ok with this, but would welcome it. It could be overwhelming to suddenly have significant money when you’re a young adult.

As the second joint owner, you can view online, request statements, withdraw funds. You and dd can agree together how hands off you’ll be

[Anonymous]

Anonymous wrote:We turned over accounts of $300k-500k to each kid when they turned 21 (we were allowed to opt 21 vs 18). However they know that money is for financial security later in life, not to go out and buy a sports car or something. It helped a lot when they were applying for rentals out of college as they looked like a good risk. They’ve also seen how money well invested can grow and are motivated to continue maxing out 401k etc. I guess my point is to teach them how to handle it.

+1. You have to teach them about money. Our DC’s custodial account was signed over at 18. He’s using it for college expenses and so far (fingers crossed), he’s been extremely wise about spending. He’s learning about investments and taxes, and understands that any money left over can be used as a down payment on a house, etc.

As others have noted, the ship has sailed, so you might as well figure out how to make the best of it.

[Anonymous]

Anonymous wrote:It was our money we put in the account, and yeah, we want to control how it's spent.

I would say that this is an opportunity to teach your children how to spend money carefully because actions have consequences, but it might be a lesson you want to learn for yourself first…