Description
- Account established at a financial institution.
- Managed by parent or another designated guardian.
- Assets must be used for the benefit of the child.
Advantages
- Assets are controlled by the custodian.
- Income earned is taxed to the child. (Kiddie tax rules apply if the child is under 19 or, if a full-time student, under 24.)
- Account costs are generally low; no trustee costs.
Tradeoffs
- Child gains complete access to the account at age of trust termination (generally 18 to 21, depending on the state).
- Transfers are irrevocable.
Financial Aid Impact
- High impact.
- Treated as an asset of the child.