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

A grandparent can open a bank account for a grandchild, but the mechanics change based on whether the child is a minor or an adult. For minors, you'll open a custodial account (also called a UTMA or UGMA account, depending on your state) where you act as the legal custodian until the child reaches the age of majority—typically 18 or 21. For an adult grandchild, you simply open a joint account or help them open their own account if they lack the documentation or credit history to do it alone.

The key difference: with a custodial account, the money legally belongs to the grandchild from day one, even though you control it. You cannot use it for your own expenses or treat it as your own savings. Once the child reaches adulthood, the account transfers to them automatically, and you lose control. If you want to retain control of money you give to a grandchild, a custodial account is not the right tool—a trust or a regular account in your name only would be.

Key Takeaways

  • A custodial account lets you open and manage money for a minor grandchild, and the account transfers to them automatically when they reach 18 or 21 depending on your state.
  • You will need the grandchild's Social Security number, birth certificate, and proof of your relationship to open a custodial account.
  • Money in a custodial account is legally the grandchild's property, so you cannot use it for your own bills or expenses.
  • If you want to keep control of money you give to a grandchild after they turn 18, a custodial account will not work—you would need a trust or a regular savings account in your name.

What you need to open a custodial account for a minor

Most banks require the same documents whether you are opening a custodial account or a regular account. Bring your government-issued ID, proof of address (a utility bill or lease), and the grandchild's Social Security number. You will also need to show proof of your relationship—a birth certificate naming you as grandparent, or a custody order if you are the legal guardian.

Some banks ask for the grandchild's birth certificate itself rather than a copy. Call ahead to confirm what your bank accepts. If the grandchild does not have a Social Security number yet, you can apply for one at your local Social Security office or online at ssa.gov; the process takes about two weeks. Many banks will let you open the account and add the number later, but policies vary.

A few banks require the grandchild to be present at account opening, even for a custodial account. Others let you open it alone. Ask your bank directly—do not assume you can do it online or by mail without checking first.

How custodial accounts work once they are open

You deposit money into the account and manage it on the grandchild's behalf. You can withdraw money to pay for the child's expenses—school supplies, medical bills, sports fees, college tuition. You can also invest the money in stocks, bonds, or mutual funds if the account offers that option. The account earns interest or investment returns, and all of that growth belongs to the grandchild.

You cannot withdraw money for your own use. If you take $500 from the account to pay your electric bill, you have technically stolen from the grandchild, even though you are the custodian. Banks do not police this, but if the grandchild later sues you or if your estate is audited, the withdrawal can be treated as a loan you owe back or as a gift that counts against your lifetime gift tax exemption.

The account generates a tax form (Form 1099-INT or 1099-DIV) each year if it earns more than a small amount of interest. The income is taxed to the grandchild, not to you, even though you control the account. This is actually a tax advantage for families with high earners, because the child's tax rate is usually lower.

What happens when the grandchild turns 18 or 21

The account automatically transfers to the grandchild's sole control. You lose all authority to withdraw money, make investment decisions, or even see the balance. The age at which this happens depends on your state and the type of account: most states use 18 for UTMA accounts and 21 for UGMA accounts, but some allow you to choose when you open the account.

You cannot prevent the transfer or require the grandchild to ask your permission before spending the money. If you have concerns about the grandchild's financial judgment, a custodial account is the wrong tool. A trust, where you name a trustee to manage money beyond the child's age of majority, gives you more control—but it is more expensive to set up and requires a lawyer.

Some grandparents open custodial accounts and then have a conversation with the grandchild before the transfer date, explaining how the money should be used. That conversation has no legal force, but it can influence the grandchild's choices.

Custodial accounts versus other ways to save for a grandchild

A 529 college savings plan is another option if your goal is to fund education. You open the account in your name, name the grandchild as the beneficiary, and the money grows tax-free as long as it is used for college or certain K-12 school expenses. You keep control of the account even after the grandchild turns 18, and you can change the beneficiary to another grandchild if the first one does not go to college. The trade-off: if the money is not used for education, you pay taxes and a 10% penalty on the earnings.

A regular savings account in your name keeps the money entirely under your control. You can spend it, leave it to the grandchild in your will, or change your mind. The downside: if you are sued or face creditors, the account is your asset and can be seized. If you die without a will, the money does not automatically go to the grandchild—it goes to your estate.

A trust lets you set rules for how and when the money is used, and who manages it if you die or become unable to manage it yourself. A lawyer must set it up, which costs $500 to $2,000 or more, but it gives you the most control and the most flexibility for complex family situations.

Tax and gift limits you should know about

Money you put into a custodial account is a gift to the grandchild. The IRS allows you to give up to a certain amount per person per year without filing a gift tax return. That limit changes each year—in 2024 it is $18,000 per person, but check the IRS website for the current year. If you give more than that in a single year, you must file Form 709 with your tax return, though you may not owe tax if you have not exceeded your lifetime gift exemption.

If you are married, you and your spouse can each give $18,000 per year to the same grandchild, for a total of $36,000, without filing. Many grandparents coordinate gifts with their spouse to stay under the annual limit.

These limits apply to gifts in general—not just custodial accounts. If you give the grandchild cash, pay for their college tuition directly, or give them a car, those all count toward the same annual limit.

What to do if you want to open an account but do not have custody

If you are not the legal guardian, most banks will still let you open a custodial account as long as you can prove your relationship to the grandchild. The parent or guardian does not have to consent, though some banks ask for a parent's contact information. The account is still legally the grandchild's, and the parent cannot access it or override your decisions as custodian.

If the grandchild's parent objects to the account, they can petition a court to remove you as custodian, but that is rare and requires showing that you are misusing the money or acting against the child's interests. Simply disagreeing with your financial choices is not enough.

If you are the legal guardian (for example, because the parent is deceased or incapacitated), opening a custodial account is straightforward—bring your guardianship papers along with the other documents.

Frequently Asked Questions

Can I open a custodial account online?

Some banks allow it, but many require you to visit a branch in person, especially if you need to show original documents like a birth certificate. Call your bank or check their website before you start the process. If you bank online-only, ask whether they offer custodial accounts at all—not all do.

What if the grandchild's parent does not want me to open an account?

The parent cannot legally stop you from opening a custodial account in most states, but if the relationship is tense, opening one without permission can escalate conflict. If you want to give money to the grandchild, you could also give it directly to the parent to hold, or wait until the grandchild is old enough to open their own account with your help.

Can I name someone else to take over the account if I die?

No. A custodial account does not have a successor custodian. If you die, the account belongs to the grandchild outright, and if they are still a minor, a court may appoint a guardian to manage it. If you want to ensure someone specific manages money for the grandchild after your death, you need a trust, not a custodial account.

Does opening a custodial account affect the grandchild's financial aid for college?

Yes. Money in a custodial account is counted as the student's asset when calculating financial aid, which can reduce their aid may be able to access more than if the money were in a parent's account or a 529 plan. If college financial aid is a concern, talk to a financial aid advisor before opening a custodial account.

Can I use the account to pay for things other than the grandchild's direct expenses?

Technically, you can withdraw money for any expense that benefits the grandchild—including rent, food, or transportation if the grandchild is living with you. You cannot withdraw it to pay your own bills. If you are unsure whether a specific expense qualifies, err on the side of caution and keep records of what the money was used for.