Custodial Accounts with Vanguard
If you're looking to invest money for a child's future needs, whether those needs involve education or something else, Vanguard offers a custodial account designed for this purpose.
Opening a Vanguard Custodial Account
To start an application, go to Vanguard.com and select the "Open an Account" link near the top of the website. You'll then be taken to a page where you can choose between establishing a new account and moving assets from another financial institution. If you already have a custodial account elsewhere,
it can be transferred to a Vanguard UGMA/UTMA account. Otherwise, select the option for opening a new account.
When establishing a new account, you'll need to select how you intend to fund it. Vanguard supports electronic transfers from a bank account as well as transfers from another Vanguard account. An existing UGMA/UTMA account maintained at another financial institution can also be transferred to Vanguard.
After working through the funding portion of the application, you'll need to specify which type of account you're establishing. To select a custodial account, choose the radio button labeled "College savings or investing for a minor."
After making that choice, you'll see two additional selections: The Vanguard 529 Plan and the UGMA/UTMA (for a minor) account. Select the second one to establish a custodial account. Whether the registration is UGMA or UTMA will depend on applicable state law.
Legal Structure of the UGMA/UTMA Account
Money contributed to a UGMA or UTMA account is not tax deductible. Because
the minor is the legal owner of the assets, investment earnings are treated as the minor's income, although the kiddie-tax rules can cause part of the child's unearned income to be taxed using the parents' tax rate.
An important consideration with a UGMA/UTMA account is that the custodian eventually gives up control when the beneficiary reaches the applicable termination age. At that time, the remaining property must be transferred to the former minor.
The termination age varies according to state law, and some states allow a customized termination age when specified requirements are met.
Custodial Account Fees at Vanguard
Vanguard can assess a
$25 annual account service fee on a UGMA/UTMA brokerage account. This fee can be avoided by signing up for electronic delivery of account documents. For legacy mutual fund-only accounts, Vanguard may instead charge a separate $25 annual service fee for each Vanguard mutual fund maintained in the account.
Better Custodial Account
Charles Schwab, one of the largest brokerage firms in the market, is another choice for investors seeking a custodial account.
It provides
$0 online commissions on listed stocks and ETFs and more than 4,000 no-load, no-transaction-fee mutual funds. Schwab One Custodial Accounts do not have account-opening or maintenance fees.
Charles Schwab offers more no-transaction-fee mutual funds than Vanguard, together with an extensive assortment of
trading platforms, investment research, and educational resources.
Learn more...
Free Charles Schwab Account
Open Schwab Account
Other Accounts at Vanguard for Minors
If a UGMA/UTMA account isn't the right fit for your objectives, Vanguard also provides a 529 plan designed primarily for education savings. Unlike UGMA/UTMA money, which the beneficiary can eventually spend for any purpose,
529 assets can cover a broad range of qualified education expenses, including eligible K-12 expenses, college and graduate-school costs, trade and vocational programs, certain apprenticeship and postsecondary credentialing expenses, and qualified student-loan repayments. If the applicable requirements are met, some unused 529 money can also be transferred to a Roth IRA for the beneficiary. The owner of a 529 account generally retains control and can usually switch the beneficiary to another qualifying family member.
Like contributions to custodial accounts, contributions to a 529 plan are not deductible for federal income-tax purposes, although a state deduction or credit may be available depending on the state.
Investment earnings can grow free of federal income tax when withdrawals are used for qualified expenses. State-level tax treatment depends on the rules of the applicable state.
Updated on 9/9/2026.
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