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

You can open a bank account for your grandchild, but the rules change based on whether the child is a minor or an adult, and whether you are acting as a custodian, guardian, or co-owner. If your grandchild is under 18, you will need to open a custodial account (also called a minor account or UTMA/UGMA account, depending on your state). You will be the custodian, meaning you manage the money until the child reaches the age of majority—usually 18 or 21, depending on your state and the account type. If your grandchild is already an adult, they can open their own account, though you can gift them money to deposit.

The bank will require proof of your identity, proof of the child's identity or Social Security number, and documentation showing your relationship to the child. Some banks ask for a birth certificate; others accept a Social Security card. You will also need to decide whether you want the account to be in your name alone (with you as custodian), or whether you want to name yourself as a co-owner alongside the child. These choices affect who can withdraw money, what happens if you die, and how the money is taxed.

Key Takeaways

  • A custodial account lets you open and manage a bank account for a minor grandchild; the money legally belongs to the child, not to you.
  • You will need the child's Social Security number, a birth certificate or ID, and proof of your own identity to open the account.
  • The account automatically transfers to your grandchild's control at age 18 or 21 (depending on your state and account type), and you lose the right to withdraw money at that point.
  • If you die before the child reaches adulthood, the account does not go through your will—it passes directly to the child, which can create tax or guardianship complications.
  • Some banks offer accounts specifically designed for minors with lower minimum balances and no monthly fees, while others treat custodial accounts the same as adult accounts.

Custodial accounts versus co-ownership: which structure to choose

A custodial account is the standard way to hold money for a minor. You open it in the child's name, with yourself listed as custodian. The money belongs to the child from day one—it is not your money, even though you control it. This matters for taxes: any interest or earnings above a certain threshold (which varies by year) is taxed at the child's rate, not yours, which is usually lower. It also matters for financial aid: if your grandchild later applies for college aid, the custodial account is counted as the child's asset, which can reduce aid may be able to access more than if the money were in your own account.

A co-ownership account (also called a joint account) lists both you and your grandchild as owners. Either of you can withdraw money without permission. This is simpler if you want your grandchild to have access to the money while they are still a minor, but it creates problems if you die: the money passes to your grandchild automatically, outside your will, which can complicate your estate and create tax issues. It also means the money is treated as your asset for Medicaid or other means-tested programs, which can affect your own benefits.

Most grandparents choose a custodial account because it keeps the money legally separate from their own finances and gives them control until the child is old enough to manage it. However, if you want your grandchild to be able to use the account (for example, to deposit their own earnings or withdraw money for school supplies), a co-ownership account may be more practical, with the understanding that you will lose control once you die or the child reaches adulthood.

What documents and information you will need

Before you go to the bank, gather the following: your government-issued photo ID (driver's license or passport), your Social Security number, your grandchild's full legal name, your grandchild's date of birth, your grandchild's Social Security number, and proof of your relationship to the child (usually a birth certificate showing the child's parents, or a custody document if you are the legal guardian). Some banks also ask for a second form of ID or a utility bill showing your current address.

If you do not have your grandchild's Social Security number, you can apply for one at your local Social Security office or online through ssa.gov. Bring the child's birth certificate and proof of your relationship. The process takes a few days to a few weeks. If the child is a newborn and you are opening the account immediately, some banks will let you open the account with just the birth certificate and allow you to add the Social Security number later.

Different banks have different requirements. Call ahead or check the bank's website to confirm what documents they need. Some banks accept digital copies; others require originals. A few banks will not open custodial accounts at all, so if you have a specific bank in mind, verify that they offer them before you make the trip.

What happens when your grandchild turns 18 or 21

The age at which your grandchild takes control of the account depends on the account type and your state. Most custodial accounts convert to regular accounts at age 18, though some states allow you to choose age 21 when you open the account. Once the child reaches that age, the account is legally theirs, and you have no right to withdraw money or make decisions about it. The bank will send notices as the child approaches the conversion age, but it is your responsibility to make sure the child understands what is happening.

If you die before the account converts, the money goes directly to your grandchild—it does not pass through your will or your estate. This can create complications if your grandchild is still a minor and you have not named a guardian, or if you intended the money to go to other heirs. For this reason, some grandparents prefer to keep savings in their own account and name the grandchild as a beneficiary in their will, though this approach means the money is subject to probate and may take months to reach the child.

Tax implications and how earnings are reported

Interest and investment earnings in a custodial account are taxed at your grandchild's tax rate, not yours. For 2024, the first $1,450 of unearned income (interest, dividends, capital gains) is tax-free for a dependent child; the next $1,450 is taxed at the child's rate; anything above that may be taxed at the parent's rate under the "kiddie tax" rule. This means a custodial savings account with modest interest is usually tax-free or nearly tax-free, which is one reason grandparents use them to save for grandchildren.

The bank will send you a 1099-INT form (for interest) or 1099-DIV form (for dividends) each year if the earnings exceed the reporting threshold. You will report this on your grandchild's tax return if they file one, or on your own return if you claim them as a dependent. If your grandchild has no other income and the earnings are below the threshold, you may not need to file a return at all, but check with a tax professional to be sure.

If you deposit your own money into the account, that is not taxable—it is a gift. However, if you give more than $18,000 per year (in 2024; this amount changes annually) to any one person, you may need to file a gift tax return, though you usually will not owe tax unless you exceed your lifetime gift limit. A tax professional can advise you on whether your contributions trigger any reporting requirements.

How custodial accounts affect financial aid and benefits

If your grandchild later applies for federal student aid (FAFSA), a custodial account is counted as the child's asset, which can reduce their aid may be able to access. The formula assumes the child will contribute a percentage of their assets toward education each year. A custodial account with $10,000 might reduce aid may be able to access by $1,000 to $2,000 per year, depending on the school and the total aid package. This is one reason some grandparents hesitate to open custodial accounts and prefer to keep savings in their own name, though that approach has its own drawbacks (the money is part of your estate, and it may affect your own means-tested benefits).

If your grandchild is receiving Supplemental Security Income (SSI) or other means-tested benefits, a custodial account can affect their may be able to access. SSI has strict asset limits—usually $2,000 for an individual—and money in a custodial account counts toward that limit. If you want to save for a grandchild who receives SSI, a special needs trust or ABLE account may be better options; consult a special needs attorney or financial advisor before opening a regular custodial account.

Where to open the account and what to expect

Most banks and credit unions offer custodial accounts. Some have accounts specifically designed for minors, with no monthly fees, no minimum balance, and features like savings goals or parental controls. Others treat custodial accounts the same as adult accounts and may charge monthly fees or require a minimum deposit. Online banks often have lower fees than brick-and-mortar banks, but you will need to complete the application online and may not be able to bring documents in person.

Call or visit the bank's website to compare options. Ask whether they offer a minor account, what the fees are, what the minimum opening deposit is, and whether they allow you to set spending limits or receive alerts. Some banks let you link a parent or guardian account so you can monitor activity; others do not. Once you have chosen a bank, bring your documents and the child's information, and the account should be open within a few minutes to a few hours. You will receive a debit card, checks, and online access.

Frequently Asked Questions

Do I need the child's parents' permission to open a custodial account?

Not legally, but it is a good idea to tell the parents what you are doing. If you are the legal guardian, you have the authority to open the account. If you are not the guardian, the parents may object or want to be involved. Some banks ask for a parent's signature or consent; others do not. Check with your bank before you apply.

What if I want to close the account before my grandchild turns 18?

You can close a custodial account at any time, but the money still legally belongs to the child. If you withdraw it, you are taking the child's money, which can create legal and family problems. If you need access to the funds for an emergency, talk to the child's parents or a lawyer first.

Can I name someone else as custodian if I die?

Not through the bank account itself. When you open the account, you are the custodian, and if you die, the account passes to your grandchild (or to their guardian if they are still a minor). To name a backup custodian, you would need to set up a trust or name a successor custodian in your will, which requires a lawyer. Some banks allow you to name a successor custodian when you open the account; ask whether yours does.

Can my grandchild have more than one custodial account?

Yes. Your grandchild can have custodial accounts at multiple banks, and you or other family members can each be the custodian of different accounts. However, all custodial accounts in the child's name are counted together for tax purposes and for financial aid calculations, so having multiple accounts does not reduce those impacts.

What if my grandchild is already an adult?

If your grandchild is 18 or older, they can open their own account without you. You can gift them money to deposit, but you cannot open or control the account. If you want to help them build credit or savings, you could co-own an account with them, but again, you would have no special control—either of you could withdraw all the money at any time.