Only the custodian can withdraw money from a custodial account before the beneficiary reaches the age of majority, and every dollar spent has to be for the minor’s direct use and benefit. The child cannot pull funds on their own, and no other parent or relative has access. The custodian’s authority is broad but it comes with a fiduciary duty, tax consequences, and real personal liability if the money is spent the wrong way.
Who Can Take Money Out
A Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) account gives one adult, the custodian, exclusive authority to manage and spend the assets on the minor’s behalf.1Social Security Administration. POMS SI 01120.205 – Uniform Transfers to Minors Act The minor cannot withdraw funds, direct investments, or liquidate holdings before reaching the age of majority. A non-custodian parent has no access either.
No court order is required for an individual withdrawal. The custodian has discretion to deliver or spend as much of the custodial property as they consider advisable for the minor’s use and benefit.1Social Security Administration. POMS SI 01120.205 – Uniform Transfers to Minors Act That discretion is not unlimited. The money and any property in the account belongs to the child from the moment the gift was made, and the gift is irrevocable.2Cornell Law Institute. Uniform Transfers to Minors Act A custodian who mismanages the funds, mixes them with personal money, or spends them on things that don’t benefit the child can face a breach-of-fiduciary-duty claim, removal, and an order to repay the account with interest.
What You Can Spend It On
The legal standard is “use and benefit” of the minor. That phrase is intentionally broad and covers much more than basic necessities. It generally reaches expenses that enrich the child’s life or advance their development beyond what a parent would normally provide. Typical examples include:
- Private school tuition, tutoring, college application fees, or a laptop needed for schoolwork
- Summer camp, sports equipment, music lessons, or travel for competitions
- A medical procedure not covered by family insurance, orthodontics, or the child’s own health insurance premium
- A car for a teenage beneficiary’s use, driving lessons, or related insurance
The test is whether the expense directly benefits the child as an individual. A laptop the child uses for school qualifies. Upgrading the family’s internet plan for everyone’s benefit probably does not. Be ready to explain why each withdrawal served the minor.
What You Can’t Spend It On
Custodial funds cannot be used to cover a parent’s legal obligation to support the child. Parents are generally required to provide food, clothing, shelter, and basic medical care from their own income. Paying the family’s rent, groceries, or utilities from the minor’s account can be treated as the custodian using the child’s money to settle a debt the parent already owed.
That misstep carries a tax consequence. When custodial funds are used to satisfy a parent’s support obligation, the income those funds generated is taxed to the parent instead of the child, because the IRS treats the expenditure as though the parent received the money. In some jurisdictions, a court can also order the parent to reimburse the account in full.
A practical line: custodial spending should supplement the child’s life, not subsidize the household. A family vacation charged to the child’s account, for example, could be challenged because it benefits everyone rather than enriching the minor individually.
How to Make the Withdrawal
Most brokerages and banks let the custodian submit a distribution request through an online portal. Some still require a paper form by mail or in person, and an in-person visit will usually call for government-issued ID. Funds generally arrive within a few business days by electronic transfer to a linked checking account. Some institutions will issue a check payable to the custodian or directly to a third party such as a school or a medical office.
To process the request, you will typically need the minor’s Social Security number or taxpayer ID, a distribution form stating the amount and purpose, and supporting documentation such as invoices, tuition bills, or receipts tied to the child’s expense. Some institutions ask the custodian to sign a declaration affirming the funds are for the minor’s benefit. Fees are usually minimal and vary by institution.
Keep the Paper Trail
Records are your protection. Hold on to original invoices, receipts, and billing statements for every withdrawal, and note which expense each one covered and how it benefited the child. The IRS generally advises keeping tax records for at least three years from the date the return was filed.3Internal Revenue Service. Good Recordkeeping Year-Round Helps Taxpayers Avoid Tax Time Frustration Because the beneficiary could question your management of the account after reaching adulthood, hanging onto custodial records for several years after the account terminates is a sensible safeguard.
Tax Consequences of Withdrawing
A withdrawal of cash on its own is not a taxable event. The tax questions come from what happens inside the account. Because the minor legally owns the assets, dividends, interest, and capital gains are reported under the child’s Social Security number on forms such as 1099-DIV (for dividends of $10 or more) or 1099-B (for investment sales).4Internal Revenue Service. Instructions for Form 1099-DIV
If you have to sell stocks, bonds, or mutual funds to raise the cash for a withdrawal, that sale can trigger capital gains or losses on the child’s return. Those gains count as unearned income, which brings in the kiddie tax.
The Kiddie Tax
Under 26 U.S.C. ยง 1(g), a child’s unearned income above a set threshold is taxed at the parent’s marginal rate rather than the child’s.5Office of the Law Revision Counsel. 26 U.S. Code 1 – Tax Imposed For 2026 the tiers run:
- First $1,350 of unearned income: tax-free
- Next $1,350: taxed at the child’s rate
- Above $2,700: taxed at the parent’s marginal rate
The rule applies to children under 18, 18-year-olds who earn less than half their own support, and full-time students aged 19 to 23 who earn less than half their own support.6Internal Revenue Service. Topic No. 553, Tax on a Child’s Investment and Other Unearned Income If unearned income exceeds $2,700, Form 8615 is filed with the child’s return.7Internal Revenue Service. Instructions for Form 8615 If the child’s only income is interest, dividends, and capital gain distributions totaling less than $13,500, the parent can elect to report that income on their own return using Form 8814 instead of filing separately for the child. Running the numbers both ways is worthwhile, since the election is simpler but not always cheaper.
Timing a large sale matters. A single sizable liquidation can push unearned income past $2,700 and send the gains into the parent’s bracket.
When the Child Takes Over
Your authority as custodian ends when the beneficiary reaches the age of majority under the state law governing the account. At that point, all remaining assets must be transferred to the now-adult beneficiary, who gains full control and can use the money for any purpose.
The termination age varies. Most states default to age 21, several default to 18, and a number allow the donor to specify a later age when the gift is made, with some permitting extensions to 25 or beyond.8Social Security Administration. POMS SI SEA01120.205 – The Legal Age of Majority for Uniform Transfer to Minors Act The age set when the account was opened controls, so check the original account documents if you’re unsure.
Once the beneficiary reaches that age, the custodian should start the handoff promptly. The beneficiary signs new account agreements, and the custodian’s name is removed. After that, the former custodian has no legal right to access or manage the funds. Refusing to turn over the money when it is requested can lead to legal action to recover the full account value, and disagreement with how the young adult plans to spend it is not a reason to hold back.