What is a custodial account?

A custodial account is managed by a legal guardian or parent for the benefit of a minor. The amount invested is kept in the account until the minor reaches the age of eligibility. A custodial account may be the Uniform Gift to Minors Act (UGMA) and Uniform to Transfer to Minors Act (UTMA). All states permit UGMA accounts. Vermont and South Carolina do not allow UTMA accounts (as of 2020).