Yes, a minor can be a beneficiary on a bank account, most commonly through a Payable on Death designation. The complication is that a child cannot legally receive or manage the money alone, so the designation needs to name an adult custodian under your state’s Uniform Transfers to Minors Act (UTMA) alongside the child. Done correctly, the funds reach the child’s benefit without probate and without a court appointing anyone.
How to Name a Minor on the POD Form
At the bank, you will complete a Payable on Death form that asks for the beneficiary’s full legal name, date of birth, and Social Security number. For a minor, that information alone is not enough. You need to add a custodian designation on the same line, worded roughly like this: “Jane Doe as custodian for John Smith under the [State] Uniform Transfers to Minors Act.”
That one sentence is what makes the account work. It gives Jane the legal authority to receive the money when you die and manage it for John until he reaches the age of termination under state law. The UTMA has been adopted in nearly every state; only South Carolina and Vermont still use the older Uniform Gifts to Minors Act in its place.1Social Security Administration. Social Security Administration POMS SI 01120.205 – Uniform Transfers to Minors Act
The custodian does not own the funds. The money irrevocably belongs to the child from the moment of transfer. The custodian’s role is to manage and invest the money prudently for the minor. Spending on the child’s education, health care, and other direct needs is permitted. Using the funds for the custodian’s own expenses, or to cover basic parental obligations the parent would owe anyway, is not.1Social Security Administration. Social Security Administration POMS SI 01120.205 – Uniform Transfers to Minors Act
What Happens If You Skip the Custodian Line
Minors lack the legal capacity to manage financial assets. If the POD form names a child without an adult to handle the money, the funds get stuck. Someone has to petition a court to appoint a guardian or conservator of the child’s property, with legal fees, delays, and ongoing court oversight that can run for years. That is exactly the outcome a POD designation is supposed to avoid, and the custodian line is what prevents it.
Pick a Successor Custodian Too
Most people name one custodian and stop there. Worth going one step further and naming a successor on the same form, in case the first custodian dies or becomes incapacitated before the child reaches adulthood.
Without a successor, the fallback depends on the child’s age when the custodian is lost. In many states, a minor who has reached age 14 can designate a new custodian. If the child is younger than 14, a court-appointed conservator typically steps in. Naming a backup up front avoids both scenarios and keeps the account out of court for a second time.
How the Custodian Claims the Account
After you die, the process at the bank is simple. The named custodian brings a certified copy of the death certificate and their own government-issued ID. Because the POD designation controls, no probate paperwork or court order is required.
The custodian will not walk out with a check. The bank moves the funds into a new custodial account titled under the UTMA, something like “Jane Doe, custodian for John Smith under the [State] UTMA.” The account’s tax identification number is the child’s Social Security number, not the custodian’s.
When the Child Takes the Money Outright
The custodianship ends at the age of termination set by state law. In most states, that age falls between 18 and 21.2Social Security Administration. SI SEA01120.205 – The Legal Age of Majority for Uniform Transfer to Minors Act (UTMA) Some states let the person creating the custodianship extend the termination age up to 25, but only if that extension is set when the account is first established.3FINRA. Regulatory Notice 20-07 – FINRA Reminds Member Firms of Their Responsibilities for Supervising UTMA and UGMA Accounts
At that age the custodian has to hand over everything. No discretion, no option to hold funds back because the young adult does not seem ready. The beneficiary shows proof of identity and age, the bank re-registers the account in their name alone, and the custodianship is finished. This automatic handover at a relatively young age is the single biggest drawback of the UTMA route, and it is worth weighing before you choose it.
Taxes on the Inherited Funds
Once the money is in the UTMA account, any interest or investment income it earns belongs to the child for tax purposes. That income is subject to the “kiddie tax,” which prevents parents from parking investment income in a child’s name at a lower rate.
For 2026, the thresholds work in three tiers:
- The first $1,350 of unearned income is tax-free, covered by the child’s standard deduction.
- The next $1,350 is taxed at the child’s own rate, typically 10%.
- Anything above $2,700 is taxed at the parent’s marginal rate.4Internal Revenue Service. Instructions for Form 8615
If the child’s unearned income tops $2,700, they need their own return with IRS Form 8615 attached, and the parent’s return has to be completed first because the parent’s taxable income feeds into the calculation. For smaller amounts, the parent can include the child’s income on their own return using IRS Form 8814. For a typical bank account earning modest interest, the tax hit is minimal. For a large balance or higher-yielding investments, the parent’s rate can apply to a meaningful chunk of the earnings.
The Financial Aid Trap
This is the detail most families setting up these accounts never consider. For federal financial aid purposes, a UTMA custodial account is the child’s asset, not the parent’s. The FAFSA formula assesses student-owned assets at 20% per year when calculating the Student Aid Index.5Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility Parent-owned assets are assessed at a much lower rate, roughly 5.6% at most.
Put concretely: a $50,000 UTMA account reduces the child’s aid eligibility by about $10,000 per year, compared to roughly $2,800 if the same money sat in a parent’s account. If need-based aid is part of the plan, that is a real cost. A 529 college savings plan is treated as a parent asset and avoids the hit, and a trust can also sidestep the issue.6Legal Information Institute. Uniform Transfers to Minors Act
When a Trust Makes More Sense Than a UTMA
A UTMA custodial account is free to set up at the bank, which makes it the right tool for most families leaving modest amounts. It has two limitations that cannot be worked around: the money transfers to the child at the age set by state law, and once it does, nothing restricts how it is spent. For a $5,000 savings account, that is fine. For a six-figure inheritance, those limitations start to look serious.
A trust fixes both. The person creating the trust picks the distribution age, which can be 30, 35, or whatever fits. The trust can also specify what the money may be used for, such as education or a first home, and release the remainder in stages. Trust assets are generally protected from the beneficiary’s creditors; UTMA funds are not, once they transfer.
The trade-off is cost and complexity. A trust requires an attorney to set up, and administration can involve annual tax filings for the trust itself. For a modest bank balance going to a grandchild, UTMA is adequate. For a substantial inheritance, or for any real concern about the beneficiary handling a lump sum at 18 or 21, a trust gives you control the UTMA route cannot.
A Side Benefit: Extra FDIC Coverage
Adding POD beneficiaries changes how FDIC insurance applies to the account. A standard single-owner deposit account is insured up to $250,000. Once you add POD beneficiaries, the account is treated as a trust account for insurance purposes, and coverage expands to $250,000 per beneficiary, up to a maximum of $1,250,000 for five or more beneficiaries.7FDIC. Your Insured Deposits
Name two grandchildren on a single account and the insured amount doubles to $500,000. Name four and it rises to $1,000,000. For anyone carrying a large bank balance, naming POD beneficiaries is one of the simplest ways to raise FDIC coverage while handling the estate side at the same time.7FDIC. Your Insured Deposits