2019: TD Ameritrade custodial accounts cost and fees (maintenance, inactivity, management), investments assets options for children and adults.

Custodial Accounts with TD Ameritrade

What’s a custodial account you ask? A custodial account is a savings or investment account that is setup for a minor and managed in their best interest by a custodian until the minor becomes an adult, at which point they gain complete ownership of the account’s assets. Many brokers, TD Ameritrade included, support custodial accounts. This article will go over any special fees for custodial accounts at TD Ameritrade and more importantly, what they are generally used for and why.


TD Ameritrade Custodial Account Fees

The good news is that there are no extra fees at TD Ameritrade for a custodial account that wouldn’t apply to their standard account. This means custodial accounts don’t have any account opening or maintenance fees at TD Ameritrade, but all of the standard account trading fees (commissions, regulatory fees, wire fees, etc.) still apply here.


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What Are Custodial Accounts Used For?

Generally speaking, most custodial accounts are opened by parents or guardians wishing to build wealth to help their children financially as they become adults. Often these accounts are setup for the purpose of funding an expected milestone in the child’s early adult life, such as a college education or a down payment on their first house. But parents can also withdraw money from the account before the child even reaches adulthood so long as the money is used to benefit the child.

The account is setup under the child’s name and social security number, and once he/she becomes a legal adult (or another age specified during the account setup) they are given legal ownership and complete control over the account’s assets.


How is a Custodial Account Different than a Trust?

The only real benefit of a custodial account over a trust is that they offer a more simplified (and lower-cost) structure, but on the other hand, they also offer less flexibility. This is important because when you setup a custodial account you will specify the beneficiary, at what age the assets are legally theirs, and who manages the money up until then (the custodian). None of these details can be changed after the account is setup (i.e. you can’t change your mind and take back the assets) so it’s important that you are confident in your decision before setting up the account.


Why Shouldn’t I Just Save for My Kids In My Own Account?

The main benefit of using a custodial account to save for your kids instead of just saving for them under your own name is tax-related. The first $1,000 of investment income in a custodial account is tax-free and the next $1,000 is taxed at the child’s tax rate (often the lowest tax bracket). Investment income above $2,000 is taxed at the parents’ rate, but only until the child is old enough to take ownership of the account, at which point all investment income is taxed at the child’s tax bracket.


A Custodial Account Can Force You to Start Saving Sooner

Besides the tax benefits, setting up a custodial account for your kids can be a good idea simply because for many people adding formality to their savings plan forces them to start saving earlier in life. And as you invest your assets for longer time periods, your wealth will benefit more from the effect of compounding returns.





TD Ameritrade Custodial Account Summary

If you have kids that you would like to start setting money aside for, whether it’s for a first car or college expenses, and are looking for a tax-advantageous, easy, low-cost way to do it, you should consider a custodial account. A custodial account with TD Ameritrade doesn’t come with any extra fees, but just make sure you’ve thought everything through since this account’s simple structure doesn’t allow for any modifications after setup.


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