What You Need Before You Start

You can open a savings account for your nephew, but the bank will require different documents depending on his age. If he is under 18, you will be the custodian — the adult responsible for the account — and the bank needs proof of both your identity and his. If he is 18 or older, he can open the account himself, though you can still contribute money to it.

For a minor, bring a government-issued ID for yourself (driver's license, passport, or state ID), your Social Security number, and your nephew's birth certificate or Social Security card. Some banks also ask for a second form of ID or proof of address. Call the bank ahead of time to confirm exactly what they need — requirements vary by institution and by state.

If your nephew is 18 or older, he will need his own government ID and Social Security number. You do not need to be present, though some banks allow it. He can open the account online, by phone, or in person depending on the bank.

Key Takeaways

  • For a minor, you become the custodian and the bank requires ID and Social Security information for both you and your nephew.
  • A custodial account belongs to your nephew, but you control it until he reaches the age of majority — usually 18 or 21 depending on your state.
  • You can deposit money whenever you want, and your nephew can see the balance, but he cannot withdraw funds without your permission until he takes control of the account.
  • Interest earned in the account may affect your nephew's taxes, so keep records of deposits and earnings each year.
  • When your nephew reaches the age set by your state, the account automatically transfers to his control — you have no say in how he uses the money after that point.

Custodial Accounts and How They Work

A custodial savings account is a bank account held in your nephew's name but controlled by you until he reaches adulthood. The money belongs to him legally, but you manage it. This is different from opening an account in your own name and putting money aside for him — the account is his asset, not yours.

When your nephew reaches the age of majority in your state — usually 18, but sometimes 21 — the account transfers to his full control. You lose the right to make decisions about it. He can then withdraw all the money, close the account, or leave it open. This is a permanent transfer, so think carefully before opening a custodial account if you want to maintain control over the money long-term.

The account is opened under what is called the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA), depending on your state. Both work the same way from a practical standpoint — the bank handles the legal structure, and you just need to know that the account will transfer to your nephew when he comes of age.

Where to Open the Account

You can open a custodial savings account at any bank or credit union that offers them. Most large national banks (Chase, Bank of America, Wells Fargo, Citibank) have custodial accounts. Credit unions often offer them too, and sometimes with lower fees or better interest rates. Online banks like Ally, Marcus, and Discover also offer custodial accounts, though you may need to do the paperwork by mail or phone rather than in person.

Compare a few options before you choose. Look at the minimum deposit required to open the account, the interest rate paid on savings, and any monthly fees. Some banks charge a monthly maintenance fee for custodial accounts; others waive it if you keep a minimum balance. Online banks often have no monthly fees and higher interest rates, but you cannot walk into a branch if you need help.

If you already bank somewhere, start there — the staff know you, and opening a second account is usually faster. If you want a higher interest rate, check online banks or credit unions in your area. The difference between 0.01% and 4.5% annual interest matters more the longer the money sits, so it is worth a few minutes of comparison.

The Application Process

Call or visit the bank and ask to open a custodial savings account. Tell them your nephew's age. If he is under 18, you will fill out an application with your information and his, and you will bring the documents listed above. Some banks let you start the process online and finish in a branch; others require you to come in person.

The bank will ask for your Social Security number and your nephew's, your address, his date of birth, and your relationship to him. They will verify your identity using the documents you bring. If you are opening the account online, you may need to upload photos of your ID and his birth certificate. The whole process usually takes 15 to 30 minutes in person or one to three business days online.

Once the account is open, the bank will give you a debit card (usually for you as custodian, though some banks issue one for your nephew too), a checkbook if you request one, and online access. You can then deposit money by transferring it from your own account, depositing a check, or bringing cash to a branch.

Tax Reporting and Interest Earnings

Money you deposit into a custodial account is not a tax-deductible gift, and your nephew does not owe taxes on the deposits themselves. However, any interest the account earns is taxable income to your nephew. If the interest is under $1,300 in a year (the 2024 threshold; it changes annually), he does not have to file a tax return. Above that, he or his parents will need to report it.

The bank will send you a 1099-INT form each January showing how much interest was earned the previous year. Keep this with your tax records. If your nephew's parents file his taxes, give them a copy of the 1099-INT so they can include it. If the interest is small, it usually does not change anyone's tax bill, but it still needs to be reported.

Some people worry that a custodial account will hurt their nephew's chances of getting financial aid for college. Custodial accounts do count as the student's asset when calculating financial aid, which can reduce aid may be able to access more than if the money were in a parent's account. If college savings is your goal, talk to a tax professional or financial advisor about whether a custodial account or a 529 college savings plan makes more sense for your situation.

What Happens When Your Nephew Turns 18 (or 21)

On the date your nephew reaches the age of majority in your state, the account legally becomes his to control. You no longer have the right to manage it, withdraw from it, or make decisions about it. The bank will send him paperwork explaining that he now owns the account outright. He can then withdraw all the money, leave it open, or do whatever he wants with it.

This transfer is automatic — you do not need to do anything, and you cannot stop it or delay it. If you are concerned about how he might use the money, have a conversation with him before he turns 18. Explain what you saved for and why. But understand that once he takes control, the decision is his.

Some custodians ask the bank to send statements to both the custodian and the minor so the young person learns about the account as he grows older. This can help him understand saving and prepare him to manage the account responsibly when it becomes his. Ask your bank whether they offer this option.

Frequently Asked Questions

Can I put money into my nephew's account without opening it myself?

Yes, once the account is open, anyone can deposit money into it. You do not need to be the one making every deposit. Grandparents, aunts, uncles, and friends can all contribute. The bank will tell you the account number and routing number, and anyone can transfer money or deposit a check to it.

What if my nephew's parents want to open the account instead of me?

They can. A parent can open a custodial account for their child just as you can. If both of you want to contribute, only one custodial account is needed — multiple people can deposit into the same account. Decide together who will be the custodian (the person who controls it until he turns 18), and that person opens the account.

Can I take money out of the account if I need it?

Legally, no. The money in a custodial account belongs to your nephew, not to you. Taking money out for your own use is considered misuse of the account and can have legal consequences. You can only withdraw money for expenses that directly benefit your nephew — things like school supplies, medical bills, or activities. If you need the money for yourself, you should not open a custodial account.

What if I want to change banks later?

You can transfer the account to a different bank. Contact the new bank and ask them to help you move the custodial account. They will handle the paperwork with the old bank, and the money will be transferred. The process usually takes five to ten business days. The account stays in your nephew's name and under your control as custodian — only the bank changes.

Does my nephew need to know about the account?

That is your choice, but most people tell the child at some point. Knowing he has money saved for him can teach him about saving and give him something to look forward to. You can explain it in simple terms when he is young and more detail as he gets older. By the time he turns 18, he should definitely know the account exists and understand that it will become his to control.