Who owns the money in a custodial account?

The assets and income held within a custodial account are designated solely for the benefit of the minor beneficiary, typically a child. This arrangement ensures that the funds are managed and preserved until the minor reaches legal adulthood.

Minors who derive unearned income, including interest, dividends, and capital gains, are subject to certain tax obligations. The Internal Revenue Service (IRS) requires that minors file an income tax return in certain circumstances.

One of the primary triggers for filing a tax return by a minor is when their unearned income exceeds a specified threshold. For the tax year 2024, this threshold is set at $1,300. If a minor's unearned income surpasses this amount, they are generally required to file a tax return.

The requirement to file a tax return for minors with unearned income above $1,300 is not the only factor that determines tax liability. Other factors, such as the child's filing status and any applicable deductions or credits, also play a role in determining the final tax outcome.

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