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What are the pros and cons of a minor opening a mutual fund account?

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What are the pros and cons of a minor opening a mutual fund account?
posted Sep 15, 2017 by Anita Yadav

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1 Answer

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Since you're not of legal age, the official arrangement would be that your parent (or other trusted person) is the custodian of your account. They are the one who has legal capacity to make withdrawals from the account, but legally are only supposed to do so for expenses that are for your benefit. Yes, the custodian would know the balances, and be the one to place any trades. If you are concerned about whether a particular person would act in your best interest for the account, you should perhaps seek another person to act as custodian (a grandparent perhaps).

These types of accounts are normally set up and funded by the custodian, so there is usually no conflict of interest. It sounds like you are concerned about a conflict. There are other concerns, regarding how taxes on capital gains, dividends and interest are reported, that could be positive or negative, depending on your situation.

In some states the legal age is 18, in others, 21. If you don't have an adult you can trust as custodian, you might be best suited to just open a bank account to hold your funds until you reach that age.

answer Sep 26, 2017 by Ritika Sharma