Yes, a grandparent can open a bank account for a grandchild, but the rules depend on the child's age and the bank's policy

A grandparent can open a custodial account (also called a guardianship account) for a grandchild under 18 at most banks and credit unions. The account belongs to the child legally, but the grandparent controls it until the child reaches the age of majority — usually 18 or 21, depending on your state and the account type. The grandparent does not need to be the child's legal guardian; being a relative is enough at most institutions.

If the grandchild is already a teenager, some banks will let them open their own account with a grandparent as a co-owner or authorized user instead. This gives the teen more control while keeping the grandparent involved. The specific rules vary by bank, so you will need to call ahead or visit a branch to find out what that bank requires.

Key Takeaways

  • A grandparent can open a custodial account for a grandchild under 18 at most banks without being the legal guardian.
  • You will need the child's Social Security number, proof of your identity, and proof of your relationship to the child (birth certificate or similar).
  • Custodial accounts automatically transfer to the child when they reach the age of majority, which is 18 in most states but can be 21 depending on account type and state law.
  • Money in a custodial account belongs to the child for tax purposes, which may affect their tax return or financial aid if they are a student.
  • Some banks require the child to be present in person to open the account; others let the grandparent open it alone.

What documents you need to bring

Bring your own government-issued photo ID (driver's license or passport) and proof of your Social Security number. You will also need the child's Social Security number and a copy of their birth certificate or other document that proves your relationship to them. Some banks accept a certified copy of the birth certificate; others will take a photocopy. Call the bank first to ask what they accept.

If you do not have the child's Social Security number yet, you can request one from the Social Security Administration using Form SS-5. This takes about two weeks by mail. Some banks will let you open the account and add the number later, but most require it upfront.

The difference between custodial accounts and co-owner accounts

A custodial account is in the child's name with you listed as custodian. The child owns the money; you manage it. When the child turns 18 or 21 (depending on state and account type), the account automatically becomes theirs to control fully, and you lose access. This is the standard option for young children.

A co-owner account lists both you and the child as owners. Both of you can withdraw money and make decisions about the account. This works better for teenagers who are old enough to understand banking. The account does not automatically transfer when the child turns 18 — you both remain owners unless you change it. Some banks do not offer co-owner accounts for minors, so ask first.

A authorized user account is different again: the account stays in your name, but the child gets a debit card and can make purchases up to a limit you set. The child does not own the account and cannot withdraw cash or close it. This is useful for teaching a teen to spend responsibly without giving them full control.

Whether the grandchild needs to be present

Rules vary by bank. Some require the child to be present in person, especially if the child is a teenager. Others let the grandparent open a custodial account for a young child without the child there. A few banks let you open the account online or by mail if the child is under a certain age (often 13 or younger).

Call your bank or credit union and ask their specific policy. If they require the child to be present, you can schedule an appointment at a branch and bring the child with you. The appointment usually takes 15 to 30 minutes.

Tax implications of money in a custodial account

Money in a custodial account belongs to the child for tax purposes. If the account earns interest or dividends, the child may owe taxes on that income, and you may need to file a tax return for them even if they have no other income. The first $1,250 of unearned income (interest, dividends) is usually tax-free for a dependent child in 2024, but amounts above that are taxed at the child's rate or your rate depending on the total.

If the child is a college student, money in a custodial account counts as the child's asset when calculating financial aid. This can reduce the amount of aid they receive, because colleges expect students to use their own savings first. Talk to the college's financial aid office if this is a concern.

What happens when the child turns 18 or 21

The age at which a custodial account transfers to the child varies. Most states use 18, but some use 21. The account type also matters: Uniform Transfers to Minors Act (UTMA) accounts and Uniform Gifts to Minors Act (UGMA) accounts have different transfer ages depending on your state. Ask the bank which age applies to the account you are opening.

When the child reaches that age, the account becomes theirs. You no longer have access or control. The child can withdraw all the money, close the account, or leave it open. There is no way to delay the transfer or keep control after the child reaches the age of majority, so make sure the child understands what the money is for before that date arrives.

Alternatives if the bank says no

If your bank will not open a custodial account without the child present, or if you want more control over how the money is used, consider a few other options. You can open a regular savings account in your own name and set aside money for the grandchild informally — but this does not give the child any legal claim to it, and it could complicate things if you pass away. You can also ask the child's parents to open an account with you as a co-owner, which gives you some involvement without the custodial structure.

Another option is a 529 college savings plan, which is a tax-advantaged account specifically for education expenses. A grandparent can open a 529 plan for a grandchild and contribute money that grows tax-free as long as it is used for college, trade school, or student loan payments. The grandparent keeps control of the account, and the grandchild does not automatically get access at 18. However, 529 plans have restrictions on how the money can be used, so they only work if education savings is your goal.

Frequently Asked Questions

Do I need to be the legal guardian to open a custodial account?

No. Most banks let any adult open a custodial account for a minor as long as you can prove your identity and relationship to the child. Legal guardianship is not required. However, some banks may ask why you are opening the account, so be prepared to explain that you are a grandparent saving for the child's future.

Can I put money in the account and then take it back out?

No. Once money goes into a custodial account, it belongs to the child legally. You cannot withdraw it for your own use. You can only use it for the child's benefit — education, medical care, living expenses, and similar costs. Using custodial money for yourself is illegal.

What if the grandchild's parents object to the account?

The parents do not have to consent for you to open a custodial account, but they may have concerns about money being set aside without their knowledge. It is a good idea to tell the parents what you are doing. If there is a custody dispute or family conflict, talk to a lawyer before opening the account, because it could complicate legal matters.

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

Most custodial accounts do not let you name a successor custodian directly in the account. When you die, the account belongs to the child, and the child's parents or legal guardian would manage it until the child reaches the age of majority. You can name a successor custodian in your will, but check with your bank about their specific process. Some banks have a form you can sign now to name a backup custodian.

Is there a limit to how much I can put in a custodial account?

There is no federal limit on how much money can be in a custodial account. However, there are annual gift tax limits if you are contributing large amounts — currently $18,000 per person per year in 2024, though this changes yearly. Amounts above the limit may trigger a gift tax return. Talk to a tax professional if you plan to contribute more than a few thousand dollars per year.