Yes, but the account structure depends on the child's age and your relationship

Grandparents can open a bank account for a grandchild, but the rules change based on whether the child is a minor or an adult. For minors, you will need to open a custodial account — a legal structure where you control the money until the child reaches the age of majority (18 or 21, depending on your state). For adult grandchildren, they must open the account themselves, though you can fund it.

The bank will ask for proof of your relationship to the child and, for minors, documentation of guardianship or parental consent. Some banks require the parent or legal guardian to sign off even if you are the one depositing money. This protects the child's assets and prevents disputes later.

The type of account you choose — savings, money market, or investment account — affects what you can do with the money and how much it grows. A simple savings account is the most common choice for grandparents saving for a grandchild's future.

Key Takeaways

  • For a minor grandchild, you must open a custodial account in the child's name with yourself as custodian, not a joint account in your name.
  • The parent or legal guardian may need to consent in writing, even if you are funding the account entirely.
  • Money in a custodial account belongs to the child and may affect their financial aid may be able to access when they turn 18.
  • Once the child reaches the age of majority, the account transfers to them and you lose control of the funds.
  • Different account types — UTMA, UGMA, or state-specific custodial accounts — have different rules about when the child takes control.

Custodial accounts: the legal structure for minor grandchildren

A custodial account is opened in the grandchild's name, with you named as the custodian. You manage the account and make decisions about deposits and withdrawals, but the money legally belongs to the child from day one. This is different from a joint account, where you would both own the money.

Most states use one of two legal frameworks: the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA). UTMA is newer and broader — it covers not just money but also real estate, stocks, and other property. UGMA covers gifts only. Your state's law determines which one applies, and the bank will tell you which form to use when you open the account.

The age at which the child takes control varies by state and by which law governs the account. Under UTMA, it is commonly 21; under UGMA, it is often 18. Some states let you choose an age between 18 and 25 when you open the account. Check your state's rules before you deposit money, because you cannot change this later.

What you need to bring to the bank

Bring your government-issued ID, the grandchild's Social Security number, and proof of your relationship — usually a birth certificate or family record showing the child's parents. The bank will also ask for the child's address, which is typically the same as the parents' address.

Many banks require written consent from the parent or legal guardian, even if you are opening the account with your own money. Call the bank before you go and ask whether they need a signed form. If they do, you will need to bring that form completed and signed by the parent.

Some banks ask for a copy of the child's birth certificate to verify the Social Security number. Others do not. Bring it anyway — it speeds up the process and proves your relationship if the bank questions it.

How custodial accounts affect financial aid and taxes

Money in a custodial account is counted as the child's asset when they turn 18, which can reduce their may be able to access for need-based financial aid in college. Federal aid formulas count student-owned assets more heavily than parent-owned assets, so a large custodial account may lower the amount of aid the child receives. This is not a reason to avoid opening one, but it is something to discuss with the parents before you deposit large sums.

The account earns interest or investment returns, and the child is responsible for taxes on those earnings once they reach a certain threshold. For 2024, the first $1,300 of unearned income is typically tax-free for a dependent child, and income above that is taxed at the child's rate (usually lower than yours). The bank will send a 1099 form to the child's Social Security number each year if earnings exceed the reporting threshold.

You do not get a tax deduction for money you put into a custodial account — it is a gift, not a charitable contribution. However, gifts to minors are generally not taxable to the child or the grandparent, as long as they stay within annual gift tax limits (which are high enough that most grandparents never hit them).

What happens when the grandchild turns 18 or 21

When the child reaches the age of majority set by your state's law, the custodial account automatically becomes theirs. You lose all control and decision-making power. The child can withdraw the money, close the account, or leave it open — that choice is entirely theirs. You cannot prevent them from accessing it or spending it however they wish.

This is a hard transition, and it is one reason some grandparents hesitate to open custodial accounts. If you are concerned about how the money will be used, talk to the parents about your intentions when you open the account. Some families agree that the grandparent will discuss the account's purpose with the child as they get older, so the child understands it was meant for education, a car, or another goal.

If you want more control over how money is used after you die, a custodial account is not the right tool. Instead, talk to an attorney about setting up a trust or naming the grandchild as a beneficiary in your will. Those options let you set conditions on how the money is used.

Opening the account at different banks

Most major banks and credit unions offer custodial accounts, but the process and fees vary. Some banks charge a monthly maintenance fee ($5 to $15); others waive it if you maintain a minimum balance or set up automatic deposits. Online banks often have lower fees but may not offer the same in-person service.

Call ahead and ask whether the bank offers custodial accounts under UTMA or UGMA, what documents they need, whether they require parental consent, and what the fees are. Some banks have age restrictions — a few will not open a custodial account for a child under 1 year old, for example. If you plan to invest the money in stocks or mutual funds rather than keep it in savings, ask whether the bank offers investment custodial accounts or whether you need to use a brokerage firm.

Credit unions sometimes have lower fees and may be more flexible about documentation, especially if you are already a member. If you belong to a credit union, start there.

Alternatives if you want more control or flexibility

If a custodial account does not fit your situation, consider other options. A 529 education savings plan lets you save for college with tax advantages, and you retain control over the money — the child cannot access it without your permission. However, if the money is not used for college, there are tax penalties.

A trust set up in your will or during your lifetime gives you complete control over when and how the money is used. You can specify that it be used only for education, or that it be held until the child turns 25, or any other condition. This requires an attorney to set up, but it offers the most flexibility.

A Roth IRA opened in the child's name (if they have earned income) lets them save for retirement with tax advantages. This is useful for teenagers who work, but it is not a general savings tool.

If you simply want to give money without opening a formal account, you can give it directly to the parents and ask them to hold it for the child. This is informal and offers no legal protection, but it works if you trust the parents completely.

Frequently Asked Questions

Do I need the parent's permission to open a custodial account for my grandchild?

Most banks require written consent from the parent or legal guardian, even if you are funding the account. Some banks do not, but it is good practice to get permission anyway. Talk to the parents first — they may have concerns about how the money affects financial aid or family dynamics.

What if the grandchild's parents are divorced or one parent is not involved?

The bank will ask for consent from the legal guardian or the parent with custody. If both parents have joint custody, some banks require both signatures; others accept one. Call the bank and ask what they need. If there is a custody order, bring a copy.

Can I withdraw money from the account before the grandchild turns 18?

Yes, as the custodian you can withdraw money for the child's benefit — education, medical care, housing, or other needs. You cannot withdraw it for your own use. If you take money out for yourself, it is considered a misuse of the account and can create legal problems.

What if I die before the grandchild turns 18?

The account does not automatically go to another custodian. You should name a successor custodian when you open the account — usually the other parent or another trusted adult. If you do not name one, the court may appoint someone, which can be slow and expensive. Ask the bank about this when you open the account.

Can I open a custodial account if I am not the grandchild's legal guardian?

Yes. You do not need to be the guardian — you just need to be a grandparent and have the parent's consent. The custodian and the guardian are different roles. You can be the custodian of the money without having any say in how the child is raised.