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My nephew is about 7 months old. Aside from being a very happy little human, he will be the first in our family to have anyone invest money on his behalf before his first birthday.

The plan is to set up a custodial savings account in his name, seed it with deposits until there is enough money to open a custodial account at Vanguard where that seed money plus any future gifts / deposits will be used to purchase mutual funds.

On it's face it seems simple enough. However, I know there are things lurking in the shadows of which I'm not fully aware that need to be brought out into the light before I go opening accounts and funding my nephew's future dreams.

Broadly speaking (tax related and otherwise) what are the implications and responsibilities of my nephew having such an investment account. Will he have to file taxes? Can his custodial assets be used against him in any way in the future (scholarship / financial aid perhaps)? Will there be any burdens on his parents? Etc...

Thanks for the knowledge and letting me slide on this potentially misplaced topic.

-K
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