Charles Schwab Custodial Accounts Highlights
- Schwab offers custodial accounts in UTMA and UGMA formats.
- Custodial accounts at Schwab have no annual fees.
- Some trades inside a custodial account will be commission-free.
- U.S. and non-U.S. residents can both open custodial accounts at Schwab.
Are you looking for a way to save money for a child or grandchild in a tax-advantaged way? Charles Schwab may have what you’re looking for.
Schwab’s Custodial Account
The Schwab One® Custodial Account is just what it sounds like: a brokerage account set up for a minor. It is available in UGMA and UTMA formats. The UTMA is the newer format and is the one most states use today. In either format, the custodial account comes with some great tax advantages with very low costs from Schwab. It’s possible to set up the custodial account as either a self-directed or automated account.
Available Investments
Self-directed custodial accounts at Schwab can buy and sell the following assets:
- Stocks, including OTC instruments
- Options
- Funds (mutual, closed-end, and exchange-traded)
- Bonds and other fixed-income securities
It is not possible to set up a custodial account as a margin account, which means short positions are not possible, and many option strategies will be completely off limits. Intelligent Portfolios, Schwab’s robo program, only trades ETFs.
Custodial Account Fees and Commissions
Custodial accounts at Schwab established as brokerage (self-directed) accounts incur no commissions on online trades of U.S.-listed stocks and ETFs. There is no fee to open the account, and there are no fees to maintain or close one. Schwab requires no minimum deposit to open a custodial account in self-managed mode.
A robo custodial account is a different story. The automated program requires $5,000 to open an account with any tax format. Schwab does not charge any management fees on robo accounts other than the expense ratios on the underlying ETFs.
Free Charles Schwab Custodial Account
Visit Schwab Website
Tax Breaks
Besides the great pricing available at Schwab, a custodial account in either UTMA or UGMA format will come with some really nice discounts from Uncle Sam. The first $19,000 worth of contributions in 2025
from an individual is free of any gift tax. Married couples get double that amount. There is no contribution limit on a custodial account, and literally anyone can contribute to the account (not just family members).
Once contributions get into the account, investment earnings below $1,350 in a calendar year are tax-free.
The next $1,350 in earnings is taxed at the minor’s rate, which is usually pretty low.
Opening a Custodial Account at Schwab
A custodial account
can be opened on either Schwab’s mobile app or website. On the latter platform, look for the orange button at the top to open a new account. Scroll down to the find the link to display all accounts (the custodial won’t show up in the initial list). On the next page, you’ll see a tile for “Education & Custodial.” Click on this tile to get to the appropriate section, and you’ll see the link for the custodial account.
On the mobile app, log in and tap on the More icon in the bottom-right corner. The next page has a link to open an account. Scroll down until you see the option for the custodial account.
Schwab is unique in the industry by offering the custodial account for non-U.S. residents. They must use hard-copy application to open an account. The completed form can be uploaded on Schwab’s website within the Message Center (assuming you have a login already). U.S. residents can use the pdf form if they want to.
However a custodial account is opened, details on both the minor and the guardian will be needed.
Education for Youngsters
Schwab’s website has some useful educational materials that beginners can take advantage of. A good place to begin is under the Learn tab at the top of the website. For the absolute novice out there, there is a New Client Welcome Center (the link is under the Learn tab).
There are self-guided courses on a variety of topics. Some of these can get rather complex like “Stock Trading with Technical Analysis,” although other materials are pretty basic:
- Your First Stock Trade
- Common Trading Mistakes to Avoid
- Dividend Basics
Charles Schwab Custodial Account Recap
Schwab has an enticing custodial-account service with very low fees and some nice learning materials to go along with it.
Get Charles Schwab Custodial Account
Visit Schwab Website
Updated on 1/7/2025.
Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
|