Is Fidelity or Charles Schwab better?

In our 2020 Best Online Brokers reviews, Fidelity earned higher scores than Charles Schwab in our Best Overall, Best for Beginners, Best for Day Trading, Best for International Trading, Best for IRA Accounts, and Best for Low Cost categories.

What do I need to open a custodial account?

To open a custodial account, all you need is basic information about your child: name, birthday and social security number. Once it’s set up, you manage all the action in the account, which revolves around deposits and deciding which assets to invest in.

How much money do you need to open a Fidelity brokerage account?

There aren’t any fees for opening up or maintaining a Fidelity brokerage account, but there is a $2,500 investing minimum. So you can set up an account for free, but you’ll need to fund it with $2,500 to start investing.

What happens to Utma when child turns 21?

“Custodial accounts are considered an asset of the child and are counted against financial aid,” he said. But when your child reaches the age of majority – 18 or 21, or even older, depending on the state – you, as the custodian, lose all control over the account.

Does custodial account affect financial aid?

Custodial accounts can have a heavy impact on financial aid. Because the money in a custodial account is your child’s asset and not yours, federal financial aid formulas consider 20% of the money available to pay for college. Compare this to 529 plans, which are given more favorable treatment for financial aid.

Is a custodial account the same as a 529?

A 529 plan provides an investment vehicle designed for building funds to pay for college for children, while a custodial account acts as a trust that enables parents to store and invest assets for their children while the children remain minors.

Do I pay taxes on a custodial account?

While not tax-deferred, as are IRAs, custodial accounts do have some tax advantages. The IRS considers the minor child the owner of the account, so the earnings in it are taxed at the child’s tax rate. Unearned income of more than $2,100 will be taxed at the parent’s rate.

Is a custodial account a good idea?

The bottom line. Custodial accounts are not a no-brainer option for saving for college or giving your minor child a financial head start in life. You might be better off keeping money that is eventually destined for your child in your own name or using a Section 529 plan to save for college.

Can I withdraw money from a custodial account?

While you can technically withdraw money from a custodial account before your child reaches the age of majority, you can only do so for the direct benefit of the child. Keep in mind that any funds you take out may also create taxable gains for your child, and that withdrawn money won’t have as much time to grow.

What do you do with a custodial account when your child turns 18?

When children reach the age of majority, the account can be transferred into their name only with custodian consent. Otherwise, they can remove the custodian from the account at the age of termination. Ask your brokerage firm what ages apply to your son’s accounts and the steps you need to take at each point.

Can a trustee be a custodian?

A trustee can also be the custodian of the trust accounts, such as a bank that serves as a trustee and holds the funds in a checking account.

Who can be UTMA custodian?

If you choose to use UTMA, you will specify a custodian who will manage property. When the young person reaches a state-determined age – usually 21, but sometimes as young as 18 or as old as age 25—he or she will receive the property outright. (See below for your state’s age or age range.)

Which is better Vanguard or Fidelity?

The report’s research shows Vanguard has a better after-tax return and is more tax-efficient than Fidelity. In the funds sampled, Fidelity had a lower expense ratio than Vanguard. They also found Vanguard funds are more diversified.

How do I transfer money from my custodial account?

You can set up a trust and transfer the monies from the custodial account into the trust. You can close the custodial account and establish a regular account at your bank or brokerage firm with the child as the sole beneficiary. The funds are still for her benefit and so she has no legal basis to sue you.

What is the best custodial account?

The overall best choice for a custodial account is Charles Schwab. Schwab gives you access to a wide range of investments with no minimum opening balance, no monthly fee, and free trades of Schwab ETFs and accounts on the Schwab Select List of mutual funds.

Is Fidelity good for beginners?

Fidelity is a good investment broker for beginners. They are a very popular and reputable broker and are best known for their mutual funds, however, their trading platform is starting to build a name for itself. Fidelity also has great research tools and fantastic customer service.

Can the custodian withdraw money from an UTMA account?

Every UTMA account has a designated custodian who can make withdrawals or cash in the account at any time. However, the cash can’t be used for day-to-day expenses like groceries. It can be used for school outings, music lessons and other non-essentials that benefit the child.