To open a UGMA account, pick a brokerage or bank that offers custodial accounts, gather Social Security numbers and government-issued ID for yourself and the child, complete the custodial account application naming yourself as custodian and the minor as beneficiary, and fund it by ACH transfer, check, or securities transfer. The whole process usually takes about 15 minutes online. Learning how to open a UGMA account is the easy part; the decisions around it — which account type, whose name goes where, and what you’re giving up by making the gift — matter more than the paperwork.
Confirm UGMA Is the Account You Actually Want
Most institutions offer both UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts, and the application will ask you to pick one. UGMA accounts hold financial assets only: cash, stocks, bonds, mutual funds, and insurance policies. UTMA accounts hold all of that plus real estate, fine art, patents, and royalties. If you’re gifting cash or securities, either works.
Nearly every state has adopted the UTMA. South Carolina is the notable holdout still operating under the UGMA framework. Where both are offered, there’s rarely a reason to choose UGMA over UTMA unless you want the assets to transfer at an earlier age, since UGMA accounts in most states hand over control at 18 while UTMA accounts often allow the transfer age to extend to 21 or even 25.
One boundary worth naming before you start: a UGMA account is not a college savings account. If your goal is specifically to pay for school, a 529 plan is usually the better vehicle for both tax and financial aid reasons, covered below.
Gather Your Information Before You Start
You’ll need identifying information for two people: the custodian (the adult who will manage the account) and the beneficiary (the minor who legally owns the assets). Federal law requires financial institutions to verify the identity of everyone involved in opening an account, so have the following ready for both parties:
- Full legal names as they appear on government-issued identification
- Social Security numbers for both the custodian and the minor
- Permanent residential addresses for both parties
- Date of birth for both parties
- Government-issued ID for the custodian (driver’s license or passport)
The Social Security number requirement is non-negotiable. Under the USA PATRIOT Act, financial institutions cannot open an account for a U.S. person without a taxpayer identification number.1National Credit Union Administration. Regulatory Alert 04-RA-04, USA Patriot Act Section 326 FAQs for Customer Identification Program If the child doesn’t have a Social Security number yet, apply for one through the Social Security Administration before you start.
Decide on your initial contribution amount and whether you’re transferring cash or specific securities, so you don’t stall mid-application. Think also about who you’d want as a successor custodian. If you become unable to serve and no successor is named, a minor aged 14 or older can designate their own replacement. For a child under 14, appointing someone new takes a court order, which costs time and money at exactly the wrong moment.
Pick a Brokerage or Bank
Most major brokerages and banks offer custodial accounts. Online brokerages tend to have the broadest range of investments and the lowest costs, and many charge no minimum deposit and no annual fee. Banks and credit unions may offer custodial savings accounts or CDs, but with more limited investment options.
You have wide latitude over what to hold. State laws generally apply a prudent person standard, meaning you should invest with the care a reasonable person would use managing their own money. That rules out highly speculative bets, but index funds, ETFs, individual stocks, bonds, and CDs are all appropriate. Anyone can contribute to the account once it’s open, not just the person who created it.
Complete the Application
Find the custodial account application on the institution’s website or in a branch. Look specifically for “UGMA” or “custodial account” rather than a generic individual or joint account. Selecting the wrong account type creates a standard account without the fiduciary protections or tax treatment of a custodial arrangement.
Enter the minor’s Social Security number in the beneficiary field, since the assets legally belong to the child and investment earnings are reported under their tax ID. Your own information goes in the custodian section. Every address must match what’s on your ID; automated verification systems reject mismatches.
Online applications finish with an electronic signature acknowledging the account terms and your fiduciary responsibilities. Paper applications go to a local branch or a mailing address the institution provides. If you mail forms, make copies first and use a trackable delivery method. You should receive a confirmation with a reference number.
Fund the Account
After approval, which usually takes a few business days, you fund the account. The most common method is an ACH transfer from an existing bank account, using the source’s routing and account numbers. Some institutions also accept wire transfers, checks, or direct transfers of securities you already hold. If a minimum initial deposit applies, the application will say so. Many online brokerages have dropped minimums for custodial accounts.
During or shortly after funding, you may be asked to upload verification documents such as a copy of your driver’s license or the child’s birth certificate. Respond quickly, because delays here hold up activation.
Understand What You’re Committing To
Every dollar you put into a UGMA account is an irrevocable gift to the child.2Cornell Law School. Uniform Gifts to Minors Act (UGMA) You cannot take it back, redirect it to a different child, or use it for your own purposes. The money belongs to the minor.
As custodian, you’re a fiduciary. You’re legally required to manage the account in the child’s best interest. Keep the account separate from your personal finances, maintain records of every transaction, and make investment decisions you can defend as reasonable. Courts have ordered custodians who commingled funds, made highly speculative investments, or withdrew money for their own expenses to repay the full amount plus interest and legal fees. Using UGMA money for basic parental obligations like food, clothing, and shelter is also problematic. Courts have held that a custodian must exhaust their own resources before tapping the child’s account for support expenses.
When the beneficiary reaches the transfer age set by state law, the account is theirs. No conditions, no restrictions, no parental veto. For UGMA accounts, the most common transfer age is 18, though it varies by state. An 18-year-old with unrestricted access can spend the balance on anything, and unlike with a 529 plan, there’s no penalty for non-educational use. You cannot add conditions after the account is opened. If controlling how the money gets used matters to you, a trust or 529 plan is a better fit.
Tax Rules That Affect Your Contribution Plan
Gift Tax
In 2026, you can give up to $19,000 per recipient per year without triggering any gift tax reporting requirement.3Internal Revenue Service. Frequently Asked Questions on Gift Taxes A married couple can give $38,000 combined to the same child. Contributions above that require filing IRS Form 709, though you likely won’t owe actual tax unless your lifetime gifts exceed millions of dollars. Because anyone can contribute, keep track of total gifts from all sources so no single donor crosses $19,000 without meaning to.
Kiddie Tax
Investment earnings in the account are taxed under the child’s Social Security number. For 2026, the first $1,350 of a child’s unearned income is tax-free. The next $1,350 is taxed at the child’s own rate, usually very low. Anything above $2,700 gets taxed at the parent’s marginal rate.4Internal Revenue Service. Revenue Procedure 2025-32 If the child’s unearned income exceeds $2,700, file Form 8615 with their tax return.5Internal Revenue Service. Instructions for Form 8615 The kiddie tax applies to children under 18, and in some cases to 18-year-olds and full-time students up to age 24 who don’t earn more than half their own support.
The practical takeaway: a UGMA account gives a real tax advantage on modest balances, but the benefit has a ceiling. Accounts producing significant returns will hit the kiddie tax, and the savings disappear once unearned income reaches the parent’s bracket.
How a UGMA Account Affects Financial Aid
On the FAFSA, a UGMA account counts as the student’s asset, not the parent’s. Student assets are assessed at a 20% contribution rate, meaning the formula expects 20 cents of every dollar to go toward college costs each year.6Federal Student Aid. Student Aid Index (SAI) and Pell Grant Eligibility Parent assets are assessed at 12% and only after a protection allowance shields a portion.
A $50,000 UGMA account reduces aid eligibility by roughly $10,000 per year under the student rate. The same $50,000 in a parent’s name would reduce eligibility by significantly less. If college is the goal, a 529 plan owned by a parent is generally the better vehicle. UGMA accounts fit best for general-purpose gifts, or when the child is years away from college applications.