You or any other adult can set up a custodial account for a minor child at any bank by agreeing to the bank's terms for opening the account and providing the child's identifying information as well as your own and that of any adult who has access to the account, says LearnVest. The terms may include a minimum deposit. Information that the bank needs includes names, addresses, Social Security numbers and telephone numbers.
The custodial account bears the custodian’s name. The terms may include a minimum deposit. Anyone can make deposits to a custodial account, but the child needs your permission to withdraw money. There are no limits on deposits, but a gift tax applies to amounts over $14,000 as of 2015, says LearnVest.
A custodial account offers the child greater flexibility than a 529 account, which is designated for college savings. You can make any type of deposit into the custodial account, including cash, annuities or savings bonds. Once the child takes over the account as an adult, he can use the balance of the account for any purpose. Custodial accounts are not tax-exempt, but the tax rate is substantially lower than on other accounts. It is based on the minor's tax bracket rather than yours, says LearnVest.