Can I Withdraw Money From My Child’s Bank Account?

Parents and guardians often manage funds for their children through bank accounts. Withdrawing money from these accounts is not always straightforward, as it depends on the account type and legal framework. Understanding these distinctions is important before accessing funds.

Understanding Account Ownership

Bank accounts involving a minor have distinct ownership structures that determine legal control over funds. Custodial accounts, like those under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA), designate the minor as the legal owner. An adult, such as a parent or guardian, acts as custodian, managing the account on the minor’s behalf until they reach the age of majority. The custodian has a fiduciary duty to manage assets prudently and in the minor’s best interest.

The Uniform Gifts to Minors Act (UGMA) allows for gifts of cash and securities. The Uniform Transfers to Minors Act (UTMA) expands this to include assets like real estate, intellectual property, and fine art. All states have adopted some form of UGMA, and most have adopted UTMA, which offers more flexibility. The age of majority, when the minor gains full control, varies by state, typically from 18 to 21.

A joint account with a minor is another common type, where both the adult and minor are co-owners. Funds in this structure belong equally to both individuals, regardless of who deposited the money. Either joint owner has full access to deposit, withdraw, or manage the funds. This setup can expose the child’s portion of the funds to the parent’s creditors, as the money is legally considered fully owned by both parties.

Some banks offer accounts where a minor is the primary accountholder, but these require a parent or guardian to co-sign due to legal restrictions on minors entering contracts. While the minor is the named accountholder, the parent retains certain rights to oversee or restrict transactions. This adult involvement is necessary because minors cannot open bank accounts independently.

Permissible Use of Funds

Legal guidelines and restrictions on using funds from a child’s account vary by account type, especially for custodial accounts. For UGMA and UTMA accounts, funds must directly benefit the minor. This includes education, healthcare, and general welfare expenses, such as reasonable living costs.

Using custodial funds to fulfill a parent’s legal obligation to support their child, such as basic food, shelter, and clothing, is considered an improper use. Courts have held that such expenditures benefit the parent, not the child, violating the custodian’s fiduciary duty. Misusing these funds can lead to legal repercussions, including potential claims of breach of fiduciary duty by the minor once they reach the age of majority.

For joint accounts, where both adult and minor are co-owners, either party can access the funds. While physical access is shared, using a child’s contributed portion for the parent’s personal benefit can lead to disputes or legal challenges. Funds in a joint account are legally presumed to belong equally to all account holders. Parents should exercise caution, ensuring withdrawals align with the funds’ intended purpose, especially if the money was earned by or gifted directly to the child.

Across all account types involving minors, funds are intended to serve the child’s best interests or belong to the child. While parents or guardians have access and management responsibilities, these powers come with legal or ethical obligations to use the money appropriately. Understanding these distinctions helps prevent legal issues and ensures funds are utilized as intended for the child’s benefit.

Practical Withdrawal Steps and Considerations

Accessing funds from a child’s bank account involves specific procedures that vary by account type and financial institution. For custodial accounts, only the designated custodian has authority to initiate withdrawals or transactions. The minor, as the legal owner, cannot directly withdraw funds until reaching the age of majority and the account is formally transferred.

Joint accounts allow any named account holder, including the adult and sometimes the minor, to make withdrawals. Banks may impose limits on a minor’s withdrawal capabilities, even on a joint account, such as daily caps or ATM restrictions. For accounts where a parent is the sole owner but the account is for the child’s use, only the parent can perform transactions.

Common withdrawal methods include visiting a bank branch, using an ATM, or initiating online transfers. At a branch, the individual making the withdrawal needs to present valid identification, such as a driver’s license or state ID, and may need to sign bank forms. Some banks might require the child’s Social Security Number or other identifying information for custodial accounts.

It is important to maintain thorough records of all transactions, especially for custodial accounts. This includes documentation of withdrawals, their purpose, and supporting receipts or invoices. Such detailed record-keeping demonstrates that funds were used for the minor’s benefit and helps ensure compliance with legal obligations.

Withdrawals from accounts, particularly custodial accounts, can have tax implications. Investment earnings within UGMA/UTMA accounts are taxed under the “Kiddie Tax” rules. This means unearned income above a certain threshold is subject to taxation. While withdrawals themselves are not taxable events, any realized gains from selling assets within the account to facilitate a withdrawal would be. It is advisable to consult with a tax professional to understand specific tax obligations related to these withdrawals.