Withdrawing from your Custodial Portfolio (2024)

FAQs

What happens if you withdraw from a custodial account? ›

Withdrawals: Withdrawals from custodial accounts must be used for the benefit of the minor. Once the minor reaches the age of majority, they can use the money for any purpose without any restrictions. 5. Contribution limits: Custodial accounts have contribution limits, which vary depending on the type of account.

No. Money and assets deposited into a custodial account immediately and irrevocably become the property of the child. In other words, you can't take the assets back or give the assets to someone else.

No, a parent cannot take money out of a UTMA account. The assets remain under the control of the custodian until the minor reaches the majority age. At that time, all remaining funds in the account are turned over to the beneficiary, free from further court supervision or management.

Yes, you can pull money out of a brokerage account with a bank account transfer, a wire transfer, or by requesting a check. You can only withdraw cash, so if you want to withdraw more than your cash balance, you'll need to sell investments first.

Upon the beneficiary's reaching the age of majority, the custodian has a duty to turn the account over to the beneficiary, at which time the beneficiary will become the account owner with complete authority over the account.

The drawbacks: You can't change the beneficiary of a custodial account once it's established. Your child can use the money however they want after reaching a certain age, and investment income in custodial accounts may trigger the kiddie tax. The account can impact financial aid eligibility.

Irrevocable gift — Money put into a custodial account belongs to the child—it's called an irrevocable gift. At the age mandated by the state, the custodian (often a parent) must transfer control to the child. At that point, they can do whatever they want with the money.

How Do Taxes Work with a Custodial Account? The child beneficiary technically owns the custodial account — not the custodian. It's the beneficiary's Social Security number that is attached to the account. Thus, the child is the one who technically needs to pay taxes.

Custodial accounts have enormous flexibility with no income or contribution limits, or withdrawal penalties. Custodial accounts do not require distributions at any point. Gifts to a custodial account are irrevocable, which means that they can't be adjusted or reversed.

Although the custodian in these accounts invests and manages the account, only the minor can use or benefit from it — the account and assets within are irrevocable and considered property of the minor. This means that the minor is also responsible for paying taxes on any investment income earned.

Can you use UTMA funds to buy a car? ›

What Expenditures Are Proper? Can I use the account to buy a car for my child? Or to send the child to private school? Yes, you are allowed to use UTMA accounts for items included in a support obligation, regardless of what you read elsewhere.

The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

To withdraw cash follow the steps below: Open the portfolio -> 'Options' -> 'Withdraw cash' -> Enter the amount -> 'Withdraw'. To withdraw the entire portfolio balance, simply enter the sum required to return your portfolio balance to zero. The balance available is displayed on the 'Withdraw cash' screen.

Through an asset management company or transfer agent: You can visit the website or the branch office of the asset management company (AMC) or the registrar and transfer agent (RTA) of your mutual fund and submit an online request or offline redemption request.

Yes, money can be withdrawn from custodial accounts, as long as it is used "for the benefit of the minor," a vague term that includes, but is not limited to educational costs.

You may owe taxes at both your rate and the child's, and they might even have to file a tax return. The most important thing for custodians to do is keep track of the account's profits and your own gifts so you know what needs to be reported at tax time and you don't run into any tax issues later.

Once the child turns 18, 21, or 25 (depending on what state you're in), the ownership of the account transfers to the child and the custodian is not allowed to withdraw money from it ever again. This is the part that often gives most parents (including me!) pause.