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, teen accounts are opened by a parent or legal guardian, though other individuals may also open such accounts.

Although the minor has the authorization to place trades, the account owner’s Social Security Number (SSN) is used for tax purposes. The assets in a teen account are not the minor’s property, and the account owner may liquidate or withdraw funds at any time.

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Potential guardrails to consider

Parental controls are typically built into teen accounts by partners to prevent misuse by the minor. Examples include:

• Trades above $X must be reviewed and approved by the adult (trades below that amount are auto-approved).
• Deposits and withdrawals must be reviewed and approved by the adult.
• Only a select list of instruments can be traded by the minor.

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).

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Not all security types are supported in Custodial accounts. Currently, only Stocks can be purchased using this account type.