How to Send Money to a Minor: An Overview of Your Options

Sending money to a minor involves various approaches, from direct transfers to structured financial accounts. Each option presents distinct features regarding control, accessibility, and the eventual use of funds. This overview provides insights into pathways for transferring money to minors, enabling informed decisions.

Direct Gifting Options

Direct gifting offers immediate and straightforward ways to provide money to a minor. These methods are simple to execute and require minimal setup, though they offer limited control over funds once transferred.

For cash gifts, a direct physical handover of funds is typical. When using checks, make it out to the minor’s full legal name. If the minor lacks a bank account, a parent or guardian often needs to endorse the check for deposit into their own account or a custodial account. Endorsement usually involves writing the minor’s name, “minor,” and then the parent’s name and relationship, such as “parent” or “guardian.”

Digital payment applications, such as Venmo, Cash App, or Zelle, facilitate quick transfers using the recipient’s phone number or email. Many platforms permit users as young as 13, often requiring parental permission or supervision. For younger children, a parent typically receives funds on their behalf. While these apps offer convenience, they may have age restrictions or require parental authorization for minors to hold accounts.

Custodial Account Options

Custodial accounts provide a formal structure for holding assets on behalf of a minor until adulthood. The two primary types are Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts. Both are managed by a designated adult, the custodian, for the minor’s benefit.

A key distinction lies in the types of assets they can hold. UGMA accounts are limited to financial assets like cash, stocks, bonds, and mutual funds. UTMA accounts offer greater flexibility, allowing for a broader range of assets including real estate, intellectual property, and art, in addition to financial assets.

To establish a custodial account, provide the minor’s full legal name, Social Security Number (SSN), date of birth, and address. For the custodian, their full legal name, SSN, and contact information are required. These accounts can be opened at various financial institutions.

Opening a custodial account can be initiated online or in person. Contributions can be made through direct deposit, electronic transfers, or checks. Assets placed into these accounts are an irrevocable gift to the minor, meaning the donor cannot reclaim them. The custodian manages the account until the minor reaches the age of majority, typically 18 to 25 years old depending on state law, at which point the minor gains full control.

Education Savings Account Options

Education savings accounts help families save for qualified educational expenses. The most widely used option is the 529 plan, which offers tax advantages for education savings. Another option is the Coverdell Education Savings Account (ESA); 529 plans generally offer higher contribution limits and are more prevalent.

In a 529 plan, an account owner controls investments for a designated beneficiary, typically the minor. Contributions grow tax-free, and withdrawals are tax-free when used for eligible expenses, including higher education and K-12 tuition. Coverdell ESAs have lower annual contribution limits ($2,000 per beneficiary) and income restrictions, but offer a broader definition of qualified expenses, encompassing K-12 tutoring and computer equipment.

To open these accounts, provide the full legal name, Social Security Number (SSN), and date of birth for both the account owner and beneficiary. Account owners also provide contact information. These accounts can be established through state-sponsored programs online or with financial advisors.

Contributing to an education savings account is flexible. Account owners can make contributions via direct deposit, electronic transfers, or checks. Many plans also allow others, such as grandparents, to contribute directly. While 529 plans typically have no federal income limits, Coverdell ESAs do.

Gift Tax Considerations

When money is sent to a minor, the giver generally faces potential gift tax implications, not the recipient. The Internal Revenue Service (IRS) establishes an annual gift tax exclusion, which is the amount an individual can give to any one person in a calendar year without incurring gift tax or requiring a gift tax return. For 2025, this annual exclusion amount is $19,000 per recipient. Married couples can combine their exclusions, effectively allowing them to give up to $38,000 to an individual annually without tax implications.

Gifts exceeding this annual exclusion amount may necessitate the filing of IRS Form 709. This form serves to report gifts that surpass the exclusion, although filing it does not automatically mean gift tax is owed. Instead, amounts above the annual exclusion typically reduce the giver’s lifetime gift tax exclusion. The lifetime gift tax exclusion for 2025 is $13.99 million per individual, meaning most individuals will not pay federal gift tax during their lifetime.

It is important to note that contributions to custodial accounts (UGMA/UTMA) and education savings accounts (529 plans and Coverdell ESAs) are also subject to these gift tax rules. While these accounts offer tax advantages for growth or withdrawals, the initial contribution still counts toward the annual gift tax exclusion. The requirement to file Form 709 is primarily a reporting measure to track the use of the lifetime exclusion, rather than an immediate tax liability for most givers.