Yes, you can open a bank account for your nephew. The standard way for an aunt or uncle to do this is a custodial account under your state’s Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA), which lets any adult serve as custodian for a minor without being the child’s parent or legal guardian.1HelpWithMyBank.gov. What Is a UGMA or UTMA Account The account is straightforward to open, but the money you put into it becomes legally your nephew’s the moment it’s deposited, and that shapes almost everything else about how these accounts work.
What a UTMA or UGMA Account Actually Is
A UTMA or UGMA account is the standard legal vehicle for transferring money or other property to a minor without setting up a formal trust. You are the custodian. Your nephew is the owner. You manage deposits, withdrawals, and any investments; the funds are reported under his Social Security number and belong to him.1HelpWithMyBank.gov. What Is a UGMA or UTMA Account
The single most important thing to understand before opening one: the gift is irrevocable. Once money goes in, you cannot take it back out for yourself. It is your nephew’s property, and you are simply holding the reins until he reaches the age at which the law hands them over.
Your role as custodian ends at the age of majority set by your state’s version of the UTMA or UGMA. That age ranges from 18 to 21 in most states, with a few going as high as 22. Some states also let the donor specify a later transfer age (up to 25 in many jurisdictions) when the account is created.2Cornell Law School Legal Information Institute. Uniform Transfers to Minors Act When your nephew hits that age, the remaining balance is his outright. He can spend it on tuition, a car, or anything else, and you have no legal say.
What You’ll Need to Open the Account
Federal rules require banks to run a Customer Identification Program on the person opening any new account. For a custodial account, the bank collects identity information from you, the adult, and separately records your nephew’s identifying details as the owner.3eCFR. 31 CFR 1020.220 – Customer Identification Program Requirements for Banks
Plan on providing:
- Your full legal name, date of birth, residential address, and a government-issued photo ID such as a driver’s license or passport.
- Your Social Security number or taxpayer identification number.
- Your nephew’s Social Security number, since the account is registered under his tax identity and earnings are reported to the IRS in his name.
- Your nephew’s full legal name, date of birth, and residential address.
- Proof of the child’s identity, typically a birth certificate.4Consumer Financial Protection Bureau. Checklist for Opening a Bank or Credit Union Account
Getting the child’s Social Security number is usually the practical bottleneck. You’ll need to ask his parents for it, which means the conversation about the account tends to happen whether or not the bank requires their sign-off.
Do You Need the Parents’ Permission?
For a UGMA or UTMA custodial account, most banks do not legally require parental consent. Any adult can act as custodian. That said, individual banks set their own policies, and some may still ask for a parent or guardian’s signature as an extra verification step, particularly if you’re opening a standard savings account rather than a formal custodial account. Call the branch ahead of time and ask specifically about their rules for a UTMA or UGMA opened by a non-parent. If one bank insists on parental involvement, another likely won’t.
A regular joint bank account for a minor (one that isn’t structured as a custodial account under UGMA or UTMA) almost always requires a parent or legal guardian as co-owner. If you want to sidestep the parental-consent question, the custodial account is the cleaner path.
Steps to Open the Account
Once your documents are in order, the process itself is quick. You can apply online at banks that offer digital custodial account applications, or walk into a branch. In person, a banker can guide you through the custodial forms and answer questions about fees and features on the spot.
The application will ask you to designate yourself as the custodian under your state’s UTMA or UGMA and to identify your nephew as the beneficiary. Double-check the child’s name and Social Security number before submitting; errors here create real headaches with the IRS later. After approval, the bank issues an account number and you can fund the account. Opening deposits at institutions that offer minor accounts range from nothing to a few hundred dollars depending on the product. From there, set up online access and schedule any recurring contributions.
How You Can Use the Money as Custodian
As custodian you have a fiduciary duty to use the account for your nephew’s benefit. The law gives you broad discretion over what counts. Education costs, medical expenses, extracurricular activities, and other spending that serves the child are all permitted. What you cannot do is redirect the funds to your own expenses or to anything that doesn’t benefit him.5Social Security Administration. Uniform Transfers to Minors Act
That duty has teeth. Misuse of custodial funds can lead to civil litigation or a court-ordered accounting.6Federal Deposit Insurance Corporation. Section 4 Compliance – Account Administration for Personal and Charitable Accounts If your purpose is long-term savings rather than covering current costs, the safest approach is to leave the balance alone until your nephew is old enough to decide how to use it.
Name a Successor Custodian
One easily missed detail: if you’re the sole custodian and you die or become incapacitated, the account doesn’t quietly pass to another relative. Without a named successor, someone in the family would generally need to petition a court to appoint a replacement, which brings paperwork, background checks, and court costs.
Ask the bank whether their custodial account forms let you designate a successor custodian. Many do. Naming the child’s parent or another trusted relative as your backup keeps the account functioning if you can no longer manage it.
Tax Rules Worth Knowing
Because the assets legally belong to your nephew, the tax consequences follow him, not you. That’s usually favorable, but there are two rules to keep in mind.
Gift Tax
Each deposit counts as a gift to your nephew. For 2026, you can give up to $19,000 per recipient per year without any gift tax filing requirement. Stay under that annual exclusion and the contribution is tax-free with no paperwork.7Internal Revenue Service. Whats New – Estate and Gift Tax
Kiddie Tax on Unearned Income
Interest, dividends, and other investment earnings in the account are treated as your nephew’s unearned income. For 2026, the first $1,350 is tax-free, the next $1,350 is taxed at his own (usually low) rate, and unearned income above $2,700 is taxed at the parent’s marginal rate. That top tier is the “kiddie tax,” which exists to prevent parents from parking investment income in a child’s name.8Internal Revenue Service. Topic No. 553, Tax on a Childs Investment and Other Unearned Income
For a basic savings account earning modest interest, none of this is likely to matter. It becomes relevant if the custodial account holds investments generating significant returns.
The College Financial Aid Trade-Off
If part of your motivation is helping your nephew with college, know that a custodial account can quietly reduce his aid. On the FAFSA, a UGMA or UTMA account is treated as a student-owned asset, and 20% of a student’s assets are counted as available to pay for college each year under the federal methodology.9FSA Partner Connect. Student Aid Index (SAI) and Pell Grant Eligibility A $20,000 custodial account could shave roughly $4,000 per year off his aid eligibility. Parent-owned assets are assessed at a lower rate, and a 529 education savings plan owned by a non-parent relative isn’t reported as an asset on the FAFSA at all under current rules.
If college is the goal, a 529 plan is worth considering as an alternative or a complement. Earnings in a 529 grow tax-free, and withdrawals are tax-free when used for qualified education expenses such as tuition, fees, books, and room and board.10Internal Revenue Service. 529 Plans – Questions and Answers The trade-off is flexibility. A custodial account can pay for anything that benefits the child and transfers outright at the age of majority. A 529 restricts withdrawals to qualified education costs (with penalties otherwise) but lets you keep long-term control, change the beneficiary to another qualifying family member, and avoid an automatic handover to your nephew at 18 or 21.p>
Custodial Account vs. 529 Plan at a Glance
- Spending flexibility: a custodial account covers any expense that benefits the child; a 529 is limited to qualified education costs.
- Control after the age of majority: custodial funds transfer to the child outright; a 529 owner keeps control indefinitely.
- Tax treatment of earnings: custodial earnings are taxed as the child’s income (with the kiddie tax kicking in above $2,700); 529 earnings are tax-free when used for education.
- Financial aid impact: a custodial account is assessed at 20% as a student asset on the FAFSA; a 529 owned by a non-parent relative isn’t reported as an asset.
- Irrevocability: both are irrevocable gifts, but a 529 owner can change the beneficiary to another qualifying family member.
For many aunts and uncles, the practical answer is a 529 if the money is earmarked for education and a custodial account if you want your nephew to have unrestricted access as a young adult. Opening both is also fair game: education savings in a 529, a smaller general-purpose amount in a custodial account.