How Old Do I Have to Be to Buy Stocks?

The ability to directly buy and sell stocks is subject to legal requirements, primarily the “age of majority.” This legal concept defines when an individual is considered an adult capable of entering into binding contracts, which is fundamental for financial transactions like opening a brokerage account and executing trades.

Age Requirements for Direct Stock Ownership

To open a brokerage account and trade stocks independently, individuals must meet the legal age of majority. In most U.S. states, this age is 18, signifying when a person is legally considered an adult capable of entering into binding contracts with brokerage firms.

This restriction exists because stock trading involves contractual obligations. Minors are not legally permitted to sign contracts, so brokerage firms require individuals to reach the age of majority before opening an account. While 18 is common, some states have an age of majority of 19 or 21. These state laws directly impact when an individual can independently manage investments.

Investing for Minors Through Custodial Accounts

Minors who have not yet reached the age of majority can still invest in stocks through custodial accounts. These accounts, commonly established under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), allow an adult to manage assets on behalf of a minor beneficiary. The adult, known as the custodian, controls the account and makes investment decisions until the minor reaches the state-defined age of majority.

UGMA and UTMA accounts function similarly, but a primary difference lies in the types of assets they can hold. UGMA accounts are typically limited to financial assets such as cash, stocks, bonds, and mutual funds. UTMA accounts offer broader flexibility, allowing for financial assets as well as physical property like real estate, artwork, and intellectual property. All states recognize UGMA accounts, while most states have adopted UTMA, with a few exceptions like South Carolina and Vermont.

The assets placed in a custodial account are considered an irrevocable gift to the minor, meaning they legally belong to the child even though the custodian manages them. This irrevocability ensures the assets are for the minor’s benefit and cannot be reclaimed by the donor. Any adult, including parents, grandparents, or other relatives, can act as a custodian and contribute to these accounts.

There are generally no annual contribution limits for UGMA/UTMA accounts, but contributions exceeding the annual gift tax exclusion amount, which is $19,000 per donor in 2025 ($38,000 for married couples filing jointly), may require filing a gift tax return. The income generated from these accounts is generally taxed to the minor, though the “kiddie tax” rules apply, meaning unearned income above a certain threshold ($2,700 in 2025) is taxed at the parent’s marginal rate. The custodian is responsible for managing the assets prudently and must use funds only for the minor’s benefit.

Transferring Custodial Account Ownership

Once the minor beneficiary of a UGMA or UTMA account reaches the age of majority, the assets held within the account must be transferred to their direct control. This age, often 18 or 21 depending on state law, marks the point when the beneficiary gains full legal access to and control over the funds. In some states, the age of termination for custodial accounts might extend beyond the general age of majority, sometimes up to 25.

The transfer process is typically initiated by the custodian. They often need to complete a transfer or registration change request form provided by the brokerage firm holding the account. The now-adult beneficiary will usually need to provide proof of age, such as a birth certificate or a valid government-issued identification, and open a new individual or joint brokerage account to receive the assets. The assets are then transferred from the custodial account into this new account under the beneficiary’s name.

While the transfer itself does not typically trigger new tax implications, any capital gains realized from selling investments within the account to facilitate the transfer, or subsequently by the new adult owner, would be taxable. The tax basis of the assets generally carries over to the new account. It is important to remember that once the transfer occurs, the former minor has complete discretion over how the funds are used, as the custodian no longer has control over the assets.