Teen accounts

Teen accounts are owned by an adult (someone at, or above, the age of majority in their state of residence) who grants trade authorization to a minor (someone below the age of majority in their state of residence). Generally, it is a parent or legal guardian who has opened the account with the intention of allowing the minor to invest.

The account owner grants trade authorization to the minor, giving them the ability to place trades in the account. The account owner’s Social Security Number (SSN) is primary and is used for tax reporting purposes. The account owner can remove all assets from the account and funds are not the property of the minor.

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Controls

Parental controls are built into the accounts in order to limit misuse by the minor, some example include:

• All trades above $25.00 must be reviewed and approved by the parent/guardian (trades below that amount are auto-approved).
• All withdrawals must be reviewed and approved by the parent/guardian.

Custodial accounts

Custodial accounts are commonly known as UTMA/UGMA accounts. The Uniform Transfers to Minors Act and the Uniform Gifts to Minors Act are laws which allow an adult to gift assets to a minor. UTMA accounts can hold gifts of cash, investments, real estate, and other assets. UGMA accounts are limited to cash and securities. DriveWealth offers UTMA accounts.

The assets in a custodial account are irrevocable and owned by the minor. As such, the minor’s SSN is primary and is used for tax reporting purposes. Although the account assets are the property of the minor, only the gifter can take action in the account. The minor cannot be given any access to, or information about, the account.

This account type requires account assets and control be transferred to the minor once they reach the age of majority (AOM) in their state (AOM varies between states).