When the account owner reaches legal adulthood -- which is 18 in most states -- the custodian's role comes to an end.
At that point, the actual owner can use the cash for college, to buy a car, or anything else she wants.
As students begin planning their college careers, they will probably fill out a Free Application for Federal Student Aid, or FAFSA.
This can happen if the investments in the account, such as mutual fund shares, grow in value.
Gains realized within a year are considered short-term gains.
It’s generally not a good idea to hand large chunks of money to a child.
That’s why the Uniform Gift to Minors Act and its newer version, the Uniform Transfer To Minors Act, are frequently used by parents and others to put money away for a child’s use when they come of age.
However, a parent is allowed to transfer the funds to another custodial account for the minor’s benefit, such as a 529 college savings account.