A custodial account is a financial account created for a minor, managed by an adult custodian, where the funds and investments are held on behalf of the minor until they reach the age of majority.
Under custodial accounts, once the minor reaches the age of majority, which is typically 18 or 21 depending on the state and the type of account, they gain full control and ownership of the assets.
An adult, typically a parents, grandparents, legal guardians or other relatives is eligible to open a custodial account on behalf of a minor, until the minor becomes an adult.
Two types of custodial accounts are established under the guidelines of the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA), depending on the state.
Cost can vary depending on financial institution or brokerage firm you choose. Some may have no opening fees, while others may charge a fee ranging from a few dollars to couple of hundred dollars.
To get money out of account, the custodian can make withdrawals for the minor until they reach the age of majority, at which point the funds are transferred directly to now-adult account holder.