If an investment account is setup for a minor can they withdraw money without penalty when they turn 18?

I think a minor can only have a custodial account, no?....what kind of account?

I believe you are right but can take ownership of it at 18. I just don’t know if they can draw funds without a penalty. I would think they could with anything other than an IRA.

Are you speaking of a taxable brokerage account? You pay taxes on gains if you withdraw but there is no penalty.

There are accounts that can be set up for minors where the minors do the actual trading as opposed to the parents. In those accounts the parents actually cannot execute trades... only the minors. Money can be removed from these accounts without penalty both before and after the minor turns 18. There are also youth brokerage accounts that the parent manages/trades in.

It might help if you could be more specific about what you were looking to do........

Fedalitys youth acount the kids do the trading in . Has an age minimum of 13.

That's good to know. I'm gonna get my child on it. I never knew that was a thing.

I’m looking to invest for their future but I don’t want to have to manage it.

Im sure other firms have similar. I just know what fedality has since i have several accounts with them and got the email about this offering on the youth acounts. . You can also open custodial Rothschild if they have earned income. I made a deal with the kids to match anything they put in their roths to encourage them to put some in it. ( you know in your teens retirement is a long ways out of your mind.)

Schwab offers an account where the custodian rather than the kids make the decisions. You do NOT want a custodial Roth if you want the kids to be able to access it penalty free before retirement age. I believe a custodial brokerage would be closer to what Hobbie is looking for. With that the kids can access it when they come of age (18 or 21 depending on state) without penalty although of course there would still be capital gains taxes as it is not a tax-advantaged account. However.... if the intended use of the money is for higher education, then there is also other options to consider as well, that would be tax-advantaged and accessible but only for education expenses without penalty....

Custodial accounts will be subject to taxation. If that is a penalty, then the answer is: yes! Just set up two at Fidelity.

"First $1,350: Tax-free (exempt from federal income tax).
Next $1,350: Taxed at the child’s tax rate.
Amount over $2,700: Taxed at the parent’s marginal tax rate."

Thank you much.