How to open a custodial IRA

How to open a custodial IRA

A custodial IRA account is a retirement account for minors with earned income Tooltip , which allows savings to grow either tax-free or tax-deferred. The account is established as a traditional IRA, Roth IRA, or Roth conversion IRA, and is managed by a parent or guardian over age 18.

You can open a custodial IRA using paper forms.

To open a custodial IRA account, you need the following:

All processes

A completed Custodial/Minor IRA Application (use IRA application instructions for more information)

  • Firm name and master account
  • Information for the account holder (minor) and custodian, including name, known by name, Social Security number, home address (no P.O. boxes or investment advisor addresses), mailing address (if different from home address), home or business phone number, birth date, country of legal residence, all countries of citizenship, ID information for non-U.S. citizens, employment status, and employer name
  • Adobe® Reader® or Adobe Acrobat® 7.0 or higher (download the latest version on the Adobe website)
  • If the minor or custodian is affiliated with a member firm of an exchange or FINRA and Rule 3210 applies, a FINRA Rule 3210 Consent Letter
In addition to the information above, the following may be required:
Additional features

 

If submitting via DocuSignFor details, see How to use DocuSign®. Use the Custodial/Minor IRA Application form to complete the workflow.
If submitting via Service Request
  1. Go to the Forms library on Schwab Advisor Center and select the Custodial/Minor IRA Application Form. Click Select and then choose the appropriate option.
  2. Complete all necessary fields, print the form, obtain the account holder's signature, and obtain applicable additional documentation.
    • The Second Name Letter/Name Change Form can be used in place of a new signature card Tooltip for Schwab One account holders requesting checks and/or a debit card with the new name.
  3. Send the signed forms to your Schwab service team via a Schwab Advisor Center service request.

If the forms were submitted using DocuSign, see the What's next section of How to use DocuSign.

Once you have submitted your request:

  • The account holder will receive an account number as soon as the application is completed and approved.
  • Schwab will send your client standard communications about their custodial IRA once it's been opened.
  • The account holder should consult with their tax advisor if they have any questions about tax implications.
  • To change the custodian or name a successor on the account, refer to How to make role changes for personal and trust accounts.
  • If you have questions about opening custodial IRAs, call your service team.

Go to the Forms library on Schwab Advisor Center and select the forms below.

Form: Beneficiary Designation Form (IRA Change Beneficiary / IRA Update Beneficiary)
Form: Custodial/Minor IRA Application
Form: IRA Distribution Form
Form: Power of Attorney (Individual POA)
Form: Transfer of Account Form Instructions (TOA / Account Transfer)

 

What are the requirements for establishing a custodial IRA?

  • Parent or guardian establishes account for a minor with earned income
  • Minor's Social Security number is required
  • Minor must have income to qualify
  • In a custodial IRA, the contribution amount for federal tax purposes must be equal to or less than the minor’s earned income. Also, the annual contribution amount is subject to IRA contribution limits


What types of IRAs can be opened?
Only traditional and Roth IRAs can be opened.

Can a custodial IRA be transferred to Schwab from another financial institution?
Yes. You can use the same processes used to fund traditional IRAs and Roth IRAs.

Are there contribution or distribution rules that apply specifically to minors?
No. The same contribution and distribution rules that apply to traditional and Roth IRAs also apply to custodial IRA accounts.

After I open a custodial IRA and am considered custodian, can I transfer the funds to another IRA I own?
No. All contributions made into the custodial IRA are considered irrevocable transfers for the benefit of the minor.

Does Schwab report custodial IRA contributions?
Yes. The IRS requires that Schwab report contributions to a custodial IRA. Contributions are considered to be for the current tax year, unless between January 1 and April 15 your client specifically indicates that the contribution is for the prior tax year.

At what age must contributions stop?
Contributions can be made until minor reaches age 18.

What is the deadline to establish and fund the account?The deadline is April 15 following the tax year for which the contribution is intended.

How to add features to an account
How to make role changes for personal and trust accounts
How to open a Roth IRA
How to open a traditional IRA
How to use DocuSign
Introduction to custodial IRAs 
Introduction to householding
Introduction to Roth IRAs
Introduction to traditional IRAs