Custodial Accounts with Vanguard
If you're looking to set aside money for a minor's expenses, whether for education or other needs, Vanguard offers a suitable account option.
Opening a Vanguard Custodial Account
To start, visit Vanguard.com and click on the "Open an Account" link at the top. This will take you to a page where you can either open a new account or transfer assets from an existing one. If you already have a custodial account elsewhere, you can transfer it to Vanguard. If not, choose to open a new account.
For a new account, you'll choose how to fund it. You can transfer money electronically from a bank, from another Vanguard account, roll over a retirement plan from a past employer, or transfer from another brokerage.
Next, specify the type of account you want. Select "College savings or investing for a minor." Then, you'll see two options: The Vanguard 529 Plan and the UGMA/UTMA account. Pick the latter for the custodial account. The specific type, UGMA or UTMA, will depend on your state.
Legal Structure of the UGMA/UTMA Account
Money put into a UGMA or UTMA account isn't tax-deductible, but it grows taxed at the child's rate, which is typically lower than the parents', or even tax-free under certain conditions.
One downside is that when the beneficiary becomes an adult—age 18 to 25, depending on the state—the people who set up the account (usually parents or grandparents) lose control over it. This isn't the case with all types of minor brokerage accounts.
Custodial Account Fees at Vanguard
Vanguard charges a $20 annual fee for each UGMA and UTMA account. If the account only holds mutual funds, this fee applies to each Vanguard mutual fund in the account. You can avoid this fee by choosing to receive account documents electronically.
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Other Accounts at Vanguard for Minors
If you're not interested in the UGMA/UTMA account, consider Vanguard's 529 plan as another option, especially for education savings. Unlike the UGMA/UTMA, funds in a 529 plan must be used for educational expenses at qualified schools, but parents retain control over the account indefinitely.
Like the custodial account, contributions to a 529 plan aren’t tax deductible at the federal level, but they might be at the state level, depending on where you live. Earnings grow tax-free federally and possibly at the state level too.
Updated on 7/14/2025.
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