Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• CUSTODIAL ACCOUNT
  
  If you want to make investments for a minor, or transfer property you already own to that person, you can open a custodial account with a bank, brokerage firm, or mutual fund company. You name an adult custodian for the account-either yourself or someone else-who is responsible for managing the account until the child reaches the age of majority (18 or 21, depending on the state and the type of account you choose). At that point, the child has the legal right to control the account and use the assets as he or she chooses. There may be some tax advantages in transferring assets to a minor. If the child is under 14, up to $650 in earnings in the account are free of federal income tax, and earnings between $650 and $1,300 are taxed at the child's income tax rate (typically the lowest rate). Any earnings above $1,300 are taxed at the parents' top marginal tax rate. But if the child is 14 or older, earnings are taxed at the child's rate-again, typically the lowest rate.
  
  Back