{"id":18292,"date":"2026-06-23T07:47:01","date_gmt":"2026-06-23T14:47:01","guid":{"rendered":"https:\/\/www.wealthfront.com/blog\/?p=18292"},"modified":"2026-06-23T09:26:55","modified_gmt":"2026-06-23T16:26:55","slug":"introducing-wealthfront-custodial-accounts","status":"publish","type":"post","link":"https:\/\/www.wealthfront.com/blog\/introducing-wealthfront-custodial-accounts\/","title":{"rendered":"Give Your Kids a Head Start with a Wealthfront Custodial Investing Account"},"content":{"rendered":"\n

Most investors are well aware that more time in the market typically helps improve returns. So it\u2019s no surprise that this logic is especially impactful for parents wanting to invest for their kids. Today, we\u2019re excited to introduce the Wealthfront Custodial Account, a simple and flexible way to start investing for your child\u2019s future.<\/strong> A Custodial Account allows you to invest on their behalf, setting them up for life expenses beyond education savings, like a down payment or a first car. <\/strong>In addition, the Wealthfront Custodial Account is one of the only Custodial Accounts that\u2019s designed to automatically reduce your child\u2019s future tax burden, before they take ownership of the account.<\/p>\n\n\n\n

What are Custodial Accounts for?<\/h2>\n\n\n\n

A Custodial Account lets you invest on behalf of your child (or any minor) before they take control of the account (as early as 18, but the age of transfer varies by state). The funds can be used for almost anything that benefits your child, whether you withdraw before or after the age of transfer, and there is no annual or lifetime contribution limit. This makes a Custodial Account one of the most flexible ways to support your child financially, no matter how their future unfolds, with more contribution and withdrawal options than a 529 Account or a Section 530A Trump Account<\/a>. <\/p>\n\n\n\n

Custodial Account funds can be used for practically any expense that benefits your child. However, they generally can’t be used for expenses that are considered parental obligations, such as food and shelter. Additionally, though there is no annual contribution limit, regular gift tax limits still apply. For 2026, a donor can gift up to $19,000 per recipient, but anything more than this will need to be reported for tax purposes.<\/p>\n\n\n\n

Designed to build long-term wealth and reduce your child\u2019s future taxes<\/h2>\n\n\n\n

When you open a Custodial Account, we\u2019ll set your child up with a globally diversified portfolio of low-cost index funds designed to soften the impact of the market\u2019s ups and downs. You can choose between three levels of risk; low, medium, or high and our software will automatically keep your portfolio balanced with your preferred risk level. You can also customize your child\u2019s portfolio by adjusting allocations, specific asset classes, and adding specific ETFs. <\/p>\n\n\n\n

We’ll even look for opportunities to help lower your child’s future taxes by automatically taking advantage of available tax benefits. For example, children can generally receive up to $1,350 of unearned income (such as interest, dividends, and capital gains) each year without owing federal income tax, though lower filing thresholds may apply in certain states. In addition, another $1,350 of long-term capital gains and qualified dividends may qualify for a 0% federal tax rate, as this portion is taxed at the child\u2019s tax rate. Our software aims to take advantage of these limits by realizing gains when they could be taxed at a low or 0% federal tax rate (assuming your child doesn’t have significant earned income or additional investment income elsewhere).<\/p>\n\n\n\n

When gains are realized, the investment’s cost basis increases. A higher cost basis means less taxable gain when the investment is sold in the future (assuming the asset appreciates). As a result, your child may owe less taxes later in life, when they’re more likely to be in a higher tax bracket.<\/p>\n\n\n\n

This strategy is known as Tax-Gain Harvesting<\/a>. If you’re familiar with Tax-Loss Harvesting, it’s a similar concept with a different goal: Tax-Loss Harvesting seeks to reduce taxes in the short term by realizing losses, while Tax-Gain Harvesting seeks to reduce taxes in the future by realizing gains when they can be taxed at a low or 0% federal tax rate. Thus, by resetting the purchase price higher, you can help ensure your child isn\u2019t taxed on that growth in the future.<\/p>\n\n\n\n

The long-term impact of Tax-Gain Harvesting<\/h2>\n\n\n\n

Let\u2019s look at an example of Tax-Gain Harvesting at work. Imagine opening a custodial account in 2008, with $5,000 in a simple 60\/40 stock\/bond portfolio when your child was one year old, and then letting it grow for the next 17 years, until 2025. If you never contributed another dollar, the account could potentially grow to over $21,500 (see table for assumptions). With Tax-Gain Harvesting, our software can sell up to the federal tax-free amount of gains each December, to raise the cost basis. The federal tax-free amount started at $900 in 2008 and increased year over year, to $1,350 by 2025 (and will likely keep increasing in the future to account for inflation). That means your child may only owe federal taxes on $2,411 worth of gains, after an annualized return of 8.89% (if they liquidated the account when they are 18 years old). As illustrated below, this is significantly lower than the account which did not use Tax-Gain Harvesting. For that client, the account would earn a slightly higher annualized return of 9.08%, but the child would owe federal taxes on $12,915. The difference in returns is small, but the client with Tax-Gain Harvesting could help their child save a lot more in taxes!<\/p>\n\n\n\n

As we mentioned earlier, our main goal with this feature is to help your child owe as little in future taxes as possible. Let’s also look at another account that took advantage of both the federal tax-free amount and the child\u2019s federal tax rate amount each year. This combined amount started at $1,800 in 2008 and increased year over year, to $2,700 by 2025 (and will likely keep increasing in the future). The account would not owe any federal taxes on gains if they sold the portfolio. In fact, despite growing more than 4x in value, the account would actually incur a small loss, because we would have realized some of the gains when the price was higher than the end of 2025. Doing this on your own would be hard and time-consuming, to say the least. But, as a Wealthfront client, this service is already included in our annual advisory fee\u2014just 0.25%.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Note: If your child receives more than $1,350 in unearned income, like from a savings account or has sizable income from a job, a tax return may be required. Additionally, some states (HI, IN, MO, PA) have a filing requirement that is lower than the federal tax-free limit. We will automatically default to the lower of either the federal tax-free limit or the state filing requirement threshold. However, you can opt out or adjust your Tax-Gain Harvesting limits in the settings.<\/em><\/p>\n\n\n\n

A great way to help your child learn to invest<\/h2>\n\n\n\n

In addition to the flexibility of Custodial Accounts, they\u2019re also a great way to teach your child about investing\u2014a way to help them make responsible investing decisions before it becomes theirs to manage. Watching the account grow over time can help them understand how compounding works in practice and a diversified portfolio in particular can illustrate how markets change year to year, busting the myth that an asset class that performs well today will always continue to do so<\/a>.<\/p>\n\n\n\n

Invest for your child, until the account is fully theirs<\/h2>\n\n\n\n

A Custodial Account is a great choice for parents that want the flexibility to help their child with future life expenses, no matter what path the child ends up choosing. That said, it\u2019s worth remembering that once your child reaches the age of transfer, how they use their funds is up to them. Helping our clients build wealth on their own terms is one of our primary motivations as a company and that includes the next generation, too. A Custodial Account makes this transition easier, for you and for them. And, with the help of our software, making meaningful progress is as easy as watching them grow up.
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Introducing the Wealthfront Custodial Account, a simple and flexible way to start investing for your child\u2019s future.<\/p>\n","protected":false},"author":10009,"featured_media":18295,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282,1278,1360,1705],"tags":[1697,1281,1294],"coauthors":[2515],"class_list":["post-18292","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","category-planning","category-product-news","category-taxes","tag-financial-planning","tag-investing","tag-taxes"],"acf":[],"yoast_head":"\nGive Your Kids a Head Start with a Wealthfront Custodial Investing Account | Wealthfront<\/title>\n<meta name=\"description\" content=\"Introducing the Wealthfront Custodial Account, a simple and flexible way to start investing for your child\u2019s future.\" \/>\n<meta name=\"robots\" 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