How to open a Vanguard custodial account for kids. Vanguard UTMA investment assets in a brokerage account for teenagers and children.

Custodial Accounts with Vanguard

If you’re trying to build a nest egg to meet the education expenses (or even non-education expenses) for a legal minor, Vanguard has an account for you that will fit the bill.

Opening a Vanguard Custodial Account

To start the application process, head over to and click on the “Open an Account” link at the top of the page. This will generate a new page that asks if you want to open a new account or transfer assets from an existing account. If you already have a custodial account at another firm, you can transfer it to Vanguard. Otherwise, click on the button to create a new account.

Vanguard Custodial Account

If you elect to do a transfer, you’ll need the name of the brokerage firm where your current custodial account is held along with the account number. You can either do a full transfer or partial transfer. For the latter type, you’ll need the CUSIP number or ticker symbol of each asset you want to move.

If you’re opening a new account, the process is a little different. You’ll need to choose how you’ll fund your new account. At Vanguard, this can be accomplished in one of several ways. You can either do an electronic transfer of money from an external bank account or a transfer from another Vanguard account.

You could also fund the new account as a rollover from an old employer’s retirement plan or a transfer from another brokerage account, which apparently would be a similar process as the one already described for the account transfer.

Once you get past the account funding screen, you’ll need to select the type of account you want to open. To select the custodial account, you’ll first need to click on the radio button next to the option for “College savings or investing for a minor.”

Once you have this choice selected, you’ll be presented with two new options: The Vanguard 529 Plan and the UGMA/UTMA (for a minor) account. Select the second option. This is the custodial account. State law will determine whether you open the UGMA or UTMA.

Legal Structure of the UGMA/UTMA Account

Contributions to a UGMA or UTMA account don’t qualify for tax deductions, but earnings do grow at the child’s tax rate (usually lower than the parents’) or at 0% in some situations.

The downside of UGMA/UTMA accounts is that once the beneficiary becomes a legal adult (somewhere between 18 and 25, depending on the state), the people who set up the account (typically, parents or grandparents) no longer have any control over the account. This is not the case with all minor brokerage accounts.

Custodial Account Fees at Vanguard

Vanguard charges a $20 annual fee on both the UGMA and the UTMA account. If the custodial account is set up as a mutual fund-only account, the fee is assessed against each Vanguard mutual fund in the account. The fee can be eliminated simply by signing up for electronic delivery of account documents.

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Other Accounts at Vanguard for Minors

If the UGMA/UTMA account doesn’t appeal to you, Vanguard does offer a 529 plan, which could be a viable alternative, especially if you’re trying to save for education. While assets in a UGMA/UTMA account can be used for any purpose, assets in a 529 plan can only be used for educational expenses at a vocational or post-secondary school. And with the 529, parents can maintain control of the account permanently.

Like a custodial account, contributions to a 529 plan aren’t tax deductible at the federal level, but may be at the state level (depends on the state). Earnings grow tax free at the federal level and might at the state level.

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