Parents can open brokerage accounts for their children and get tax breaks, according to The Motley Fool. Custodial accounts are so named because they are opened in the name of the parent and will remain under their control until the child turns 18 or 21 (depending on the state) and assumes ownership.
Other than the transfer of ownership, these brokerage accounts are the same as any other and investments can be made into any of the brokerage’s offerings. Any withdrawals or earnings from the account will be taxed at the child’s rate which is typically much lower than the household’s. Money can be pulled out to cover certain expenses that would benefit the child.
