Custodial minor account and taxes

It's called the Uniform Transfers to Minors Act, or Uniform Gifts to Minors Act, depending on which state you live in. The rules may very slightly state to state. So, for example, you can keep control over the custodial account until the child is 18, and perhaps 21. You should check with someone in your state to determine the precise rules.

While the children are under 21, contributions to the account will qualify for the $15,000 (per donor per donee)annual gift tax exclusion. That amount increases by inflation from time to time.

But you need to understand that any income earned in the account (i.e. dividends or capital gains) belongs to the child, and the account should be registered under the child's Social Security Number. Also, passive income such as this, is either taxed at the highest marginal tax rate, or can be taxed instead on the parent's tax return, which may be at a lower tax rate.

I'd look at

for more details. I once answered a similar question with Stu's details only to have the OP reply that they were talking a few thousand dollars, and the $2200 kiddie tax provision (basically $1100 tax free and $1100 at 10% rate) would suffice probably past the age of 21. Consider, a fund with 3% dividend would need nearly $37,000 invested to give off dividends of just the $1100 I mentioned.