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Can I open a CD account in someone else’s name, such as a child’s?

Curious about Certificates of Deposit

Can I open a CD account in someone else’s name, such as a child’s?

Whether you can open a Certificate of Deposit (CD) account in someone else's name, such as a child's, depends on the policies of the financial institution where you plan to open the CD. Here are some common scenarios:

1. Minor Child: If you want to open a CD in the name of a minor child (under the age of 18 or 21, depending on the jurisdiction), many banks and credit unions allow this but typically require a custodial or joint account. A custodial account means that an adult, often a parent or legal guardian, manages the account on behalf of the child until they reach the age of majority.

2. Joint Account: You can open a joint CD account with the child, where both the child and the adult are named as account holders. In this case, both parties have access to the funds and can make decisions regarding the CD.

3. Trust Account: Some financial institutions offer trust accounts that allow an adult to open a CD for the benefit of a minor child. These accounts are managed by a trustee and are subject to specific legal arrangements.

4. Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA): In the United States, many states have enacted UTMA or UGMA laws that allow an adult to open a custodial account for a minor child. These accounts are typically used for the child's benefit, but the custodian manages the funds until the child reaches a certain age specified by state law.

When opening a CD in a minor's name or as a custodial account, it's important to:

Be aware of the child's age of majority in your jurisdiction, as the CD terms may need to be structured accordingly.
Understand the rules and responsibilities associated with custodial accounts or trust accounts.
Determine whether the child will have access to the funds before they reach the age of majority or if withdrawals will be restricted.
Consider the tax implications, as income earned on the CD may be subject to income tax.

It's advisable to contact the financial institution where you plan to open the CD to inquire about their specific account options and requirements for minors. Additionally, consult with a financial advisor or legal expert if you have questions about the best way to structure the CD for the child's benefit and financial future.

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