New Product: Wealthfront Custodial Account
Today we launched the [Wealthfront Custodial Account](https://www.wealthfront.com/custodial?utm_source=reddit&utm_medium=organic-social&utm_campaign=custodial-gtm). This new account provides a simple and flexible way for parents to save for their child’s future, and it’s one of the only custodial accounts that’s designed to automatically lower the child’s future tax burden through Tax-Gain Harvesting. For a limited time, we’re offering a $100 seed contribution for clients who open either a new Wealthfront Custodial Account or a 529 Account.
# How does Wealthfront’s Custodial Account work?
When you open a Custodial Account, we’ll set your child up with a globally diversified portfolio of low-cost index funds designed to soften the impact of the market’s ups and downs. Our software also works to reduce your child’s future taxes through our automated Tax-Gain Harvesting. You can choose between three levels of risk; low, medium or high and our software will automatically help keep your portfolio balanced with your preferred risk level. You can also customize your child’s portfolio by adjusting asset allocations and adding or removing specific ETFs.
# Who is a Custodial Account right for?
A Custodial Account is a great choice for parents that want the flexibility to help their child with future life expenses, no matter what path the child ends up choosing. It’s worth remembering that once your child reaches the age of transfer (as early as 18, but varies by state), how they use their funds is up to them.
|Use it for|Child’s first investing account—or to help with a car, down payment or nest egg| |:-|:-| |Tax treatment|Wealthfront’s Custodial Account is designed to reduce your child’s future taxes. Pay no federal taxes on up to $1,350 in unearned income (e.g. investment gains) each year. An additional $1,350 in long-term gains may also qualify for a 0% federal tax rate if your child has little or no other income. | |Contributions|No contribution limits although regular gift tax limits apply| |Ownership rules|Transfers to child as early as 18, but varies by state|
In addition to the flexibility of Custodial Accounts, they’re also a great way to teach your child about investing before it becomes theirs to manage. Watching the account grow over time can help them understand how compounding works in practice and a diversified portfolio in particular can illustrate how markets change year to year, busting the myth that an asset class that performs well today will always continue to do so.
# How does Wealthfront help lower taxes with a Custodial Account?
We look to help lower your child's future taxes by automatically taking advantage of available tax benefits. For example, children can generally receive up to $1,350 of unearned income (such as interest, dividends, and capital gains) each year without owing federal income tax. In addition, another $1,350 of long-term capital gains and qualified dividends may qualify for a 0% federal tax rate. Our software aims to take advantage of these limits by realizing gains when they can be taxed at a low or 0% federal tax rate (assuming your child doesn't have significant earned income or additional investment income elsewhere).
When gains are realized, the investment's cost basis increases. A higher cost basis means less taxable gain when the investment is sold in the future (assuming it appreciates in value). As a result, your child may owe less tax later in life, when they're more likely to be in a higher tax bracket.
**This strategy is known as Tax-Gain Harvesting**. If you're familiar with Tax-Loss Harvesting, it's a similar concept with a different goal: Tax-Loss Harvesting seeks to reduce taxes in the short term by realizing losses, while Tax-Gain Harvesting seeks to reduce taxes in the future by realizing gains when they can be taxed at a low or 0% federal tax rate. By resetting the purchase price higher, you can help reduce the tax bill your child may face on that investment down the road when it's sold.
Head over to our [blog](https://www.wealthfront.com/blog/introducing-wealthfront-custodial-accounts/) to learn more about Wealthfront’s Custodial Account incl. how it stacks up against a 529 Account.
—
*Nothing in this communication should be construed as investment or tax advice. Investing involves risk, including loss of principal. Past performance is not a guarantee of future results. Wealthfront Advisers LLC and affiliates do not provide legal or tax advice and are not liable for tax consequences of client transactions. Please consult a personal tax advisor. You are responsible for reporting transactions to the IRS or other taxing authorities.*
*Custodial accounts (UGMA/UTMA) come with significant limitations. Contributions to a custodial account are irrevocable gifts, meaning once assets are moved into these accounts, they belong to the beneficiary and cannot be reclaimed by the donor for any reason. You also can't rename the beneficiary or use the assets for another person. Custodians have a fiduciary duty to use funds exclusively for the beneficiary's benefit. Legal control of the assets automatically transfers to the beneficiary upon reaching the age of termination (typically 18 to 25, depending on the state), at which point they may use the funds for any purpose, regardless of the custodian’'s original intent. These accounts can also negatively impact financial aid eligibility because the assets are owned by the beneficiary. They are weighted more heavily than parental assets in financial aid formulas, which may significantly reduce eligibility for need-based financial aid.*
*From a tax perspective, Custodial accounts are not tax-deferred; they are subject to "Kiddie Tax" on unearned income above certain thresholds. For the 2026 tax year, the first $1,350 of a child's unearned income is tax-free, the next $1,350 is taxed at the child's marginal rate, and any amount over $2,700 is taxed at the parents' marginal rate. Contributions must adhere to federal gift tax rules ($19,000 for individuals or $38,000 for a married couple in 2026). Any contributions over the gift tax exclusion may be subject to gift tax. Keep in mind, these figures can change.*
*Tax-Gain Harvesting is intended to help a beneficiary utilize the 0% federal long-term capital gains tax rate available under the Kiddie Tax rules to potentially reduce future federal tax liability. The effectiveness of this strategy is entirely dependent on the beneficiary’s total unearned income for the tax year (this includes any unearned income outside of Wealthfront) and their current qualification under the Kiddie Tax rules (age, any earned income, and student status). The benefit achieved may be limited or eliminated by a client’s specific tax situation. While the strategy aims to realize gains federal-tax-free, state and local taxes may still apply.* ***Wealthfront will harvest less for Clients with beneficiaries residing in states with lower unearned income thresholds to help avoid creating additional state tax filing requirements.*** *The transaction, which involves selling and immediately reinvesting, may result in gains exceeding the client’s selected harvesting limit due to market volatility or late-arriving dividends.*
*The $100 Seed Funding promotion is for new and existing clients of Wealthfront Advisers and requires opening a new Custodial or 529 Account during the "Account Opening Window" (June 23, 2026, through 11:59pm EST on July 23, 2026) and meeting the minimum initial deposit by the "Funding Deadline" (11:59pm EST on August 23, 2026). Additional Terms and Conditions apply. For full details, please review the Custodial & 529 Incentive promotion at* [*wealthfront.com/promo-terms*](http://wealthfront.com/promo-terms)*.*
*Investment management and advisory services are provided by Wealthfront Advisers LLC, an SEC-registered investment adviser. Brokerage products are provided by Wealthfront Brokerage LLC, a Member of FINRA/SIPC.*