Robinhood does not offer custodial accounts
Robinhood does not provide custodial accounts for minors. The platform requires all account holders to be at least 18 years old and have a valid Social Security number or Individual Taxpayer Identification Number. If you want to invest money on behalf of a minor, you will need to use a different brokerage or financial institution that specifically supports custodial accounts.
This is a significant limitation if you are a parent or guardian looking to build an investment account for a child. Many other brokerages — including Fidelity, Charles Schwab, Vanguard, and E*TRADE — do offer custodial accounts under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). These accounts let you invest on behalf of a minor while maintaining legal control until the child reaches the age of majority.
Key Takeaways
- Robinhood requires account holders to be 18 or older, so you cannot open a custodial account there for a minor.
- Custodial accounts under UGMA or UTMA are available at other brokerages like Fidelity, Charles Schwab, Vanguard, and E*TRADE.
- A custodial account lets you invest money for a child while you retain control until they reach the age of majority (usually 18 or 21, depending on your state).
- The money in a custodial account belongs to the minor, not the parent or guardian, and has tax implications you should understand before opening one.
How custodial accounts work at other brokerages
A custodial account is opened in the minor's name, but you (the parent or guardian) control all investment decisions and transactions until the child reaches the age of majority. You deposit money into the account, choose what to invest in, and manage the account on the child's behalf. The child's Social Security number is used for the account, and any earnings are reported on the child's tax return, not yours.
When the minor reaches the age of majority — typically 18 or 21, depending on your state and whether you use UGMA or UTMA — the account transfers to their full control. At that point, you no longer have authority over the account, and the child can do whatever they want with the money. This is an important consideration: once they turn 18 or 21, the money is legally theirs to spend, invest, or withdraw.
The main difference between UGMA and UTMA is what types of assets can be held. UGMA accounts are limited to cash, stocks, bonds, and mutual funds. UTMA accounts can also hold real estate, artwork, and other property. Most brokerages that offer custodial accounts support both, and you choose which one when you open the account.
Tax treatment of custodial accounts
Money in a custodial account belongs to the minor, not the parent, so the tax consequences fall on the child. This can be an advantage or disadvantage depending on the child's income level. In 2024, the first portion of a minor's unearned income (such as dividends or capital gains) may be taxed at the child's rate rather than the parent's rate, which is often lower.
However, there is a limit. The IRS applies the "kiddie tax" rule, which means that unearned income above a certain threshold is taxed at the parent's rate instead of the child's rate. The exact threshold changes each year. You should consult a tax professional to understand how a custodial account will affect your family's taxes before opening one.
Alternatives to custodial accounts
If you want to invest for a minor but do not want to use a custodial account, you have other options. A 529 college savings plan is specifically designed for education expenses and offers tax advantages. You can open a 529 plan in most states, and the money grows tax-free if used for may have access to education costs. The account owner (you) retains control even after the child turns 18, which is different from a custodial account.
Another option is a Roth IRA for minors, which is available if the child has earned income from a job. A Roth IRA lets the child save for retirement with tax-free growth, and you can help them fund it. However, the child must have actual earned income to open one.
You can also simply open an investment account in your own name and earmark the money for your child's future. This keeps you in full control and avoids the tax complications of a custodial account, but the money is legally yours, not the child's.
Which brokerages offer custodial accounts
If you decide a custodial account is right for your family, several major brokerages support them. Fidelity, Charles Schwab, Vanguard, E*TRADE, and TD Ameritrade all offer custodial accounts with low or no account minimums. Many also offer commission-free stock and ETF trading, which can help keep costs down over time.
When comparing brokerages, look at the investment options available (stocks, ETFs, mutual funds, bonds), the account minimums, any fees charged, and the ease of use. Some brokerages have mobile apps that make it simple to manage the account on the go. Read the account agreement carefully to understand the rules for your state, since UGMA and UTMA rules vary by state.
Why Robinhood does not offer custodial accounts
Robinhood's business model focuses on individual investors aged 18 and up. The platform does not currently support custodial accounts, and there is no public indication that this will change. If you are interested in using Robinhood for your own investments, you can do so as an adult, but you cannot open an account for a minor through Robinhood.
If a minor in your household wants to start investing, you can open a custodial account at another brokerage and use that to teach them about investing. Once they turn 18, they can open their own Robinhood account if they choose to.
Frequently Asked Questions
Can a teenager open their own Robinhood account?
No. Robinhood requires account holders to be 18 years old. A teenager under 18 cannot open an account, even with parental permission. Once they turn 18, they can open their own account and begin trading independently.
What is the difference between UGMA and UTMA custodial accounts?
UGMA accounts hold cash, stocks, bonds, and mutual funds. UTMA accounts can also hold real estate, artwork, and other property. Both transfer to the minor at the age of majority. Your state law determines which one is available and what the age of majority is (usually 18 or 21).
Do I have to pay taxes on money in my child's custodial account?
No. The money in a custodial account belongs to the child, so earnings are taxed on the child's tax return, not yours. However, the "kiddie tax" rule may apply if unearned income exceeds a certain threshold, causing some income to be taxed at your rate instead.
Can I withdraw money from my child's custodial account?
Technically, you can withdraw money, but it must be used for the child's benefit. Withdrawing money for your own personal use is considered a breach of your fiduciary duty and can have legal consequences. The money is the child's, not yours, even though you control the account.
What happens to a custodial account when the child turns 18?
The account automatically transfers to the child's full control. You no longer have authority over it, and the child can withdraw, spend, or reinvest the money however they choose. This is why it is important to discuss the account with your child before they reach the age of majority.