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Written by Cari Scribner on February 25, 2021
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Does M1 Finance Offer Joint Or Custodial Accounts?

M1 Finance is an established online trading platform whose target demographic customers have longer-term goals for their investments. They can be saving up for a down payment on a first home, new vehicle or even to build up a solid emergency fund.

They may have had experience with using other popular online brokerages to invest in stocks and ETFs.

You can have as much control over what’s in your portfolio as you choose. Select your own financial products, or let M1 help you put together and manage your custom investment portfolio. You will need a minimum of $100 to open a trading account ($500 minimum to open an IRA).

You create your portfolio or choose from 30+ pre-built portfolios called "pies."

Once your portfolio is up and running, M1 steps in with its own exclusive system to automate all of your trading activity. You'll never have to input or execute any trades manually. This is a major plus for people  who are just learning how to balance the activity in their portfolios.

What’s more, there’s an M1 auto-invest feature used most frequently by members. With auto-invest on, any time your cash balance meets or exceeds $25, M1 will automatically invest into your portfolio. To select this option within the app, turn auto-invest on and set your minimum cash balance to $0.

But, do they offer joint or custodial accounts? Let's discuss.

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Types of M1 Finance Brokerage Accounts

M1 offers individual and joint brokerage account. Again, you are required to open the account with a minimum of $100.

  • Individual Brokerage Accounts: An account under one person’s name used to buy and sell stocks, bonds, exchange traded funds, and other types of investments.
  • Joint Brokerage Accounts: This account gives two or more people equal ownership. Joint accounts are typically common for couples, parents and their children (over 18 years old), and adults caring for aging parents.

Joint accounts let multiple people have control of the investment account, letting them to make trades, deposits and withdrawals, and other activities related to their investments.

Joint accounts can be an effective and efficient way to pool your money together with your partner. They can be a way to work towards saving for a shared goal, such as a down payment on a home. These accounts work best when each person is contributing the same amount on a pre-set schedule.

It can often be easier to manage one joint account than to manage multiple accounts for couples or other family members. Some costs, such as account maintenance fees, may be reduced.

And finally, having more assets will give you more investing power.

There are also disadvantages to joint accounts.

Both (or all) the people on the account will have authority to engage in trading moves. They could potentially sell off all the portfolio assets and withdraw the money without the permission of others on the account. That, of course, is the worst case scenario.

After you have carefully weighed the pros and cons of a joint brokerage account, M1 Finance may be a good choice for you.

What Is A Custodial Brokerage Account?

This type of account lets an adult, such as a parent, grandparent, other relative, or family friend invest money on behalf of a child. This means that while the child owns the assets contained in the account, the adult makes all of the investment decisions.

The adult opening the account will invest on behalf of the minor and build a diverse portfolio in a wide array of assets, including a combination of stocks, mutual funds, bonds and ETFs.

Keep in mind that all assets in a custodial account are considered irrevocable gifts and are held in the child’s name. You will not have the power to change the child who benefits from the account once it is set up.

The account must be transferred to the minor when he or she reaches age 18 or 21. Depending on the state in which you live, this can be up to 25.

m1 finance custodial account

Why Open A Custodial Account?

There are significant tax benefits for the adult in charge of the custodial account.

These accounts let you keep investing money on behalf of a child, without you holding legal ownership of those assets. This is a plus for income tax purposes.

Unearned income in a custodial account will be taxed to the child rather than to the adult overseeing the account. Most children have little or no earned income. This places them in  a much lower tax brackets than the adult, which means lower tax bills or even no taxes charged at all.

You can take advantage of the annual federal gift tax exclusion and incur no gift taxes for contributions up to $15,000 per person annually, or $30,000 for married couples filing jointly.

Accounts are held under the minor's name and social security number and there can only be one custodian per account.

M1 Finance, however, does not offer custodial accounts. You might want to look into Firstrade as another option.

Firstrade Custodial Accounts

Firstrade is bro­ker-dealer head­quar­tered in New York that of­fers a plat­form to trade fi­nan­cial as­sets in­clud­ing stocks, ex­change-traded funds (ETF), op­tions, mu­tual funds, and bonds. It offers a well-organized website, user-friendly tools and quality research.

The company does not charge commissions for most financial transactions; however, it does not offer the advisory services many investors are looking for.

It is known for being an easy-to-navigate platform even for beginners in the world of investing.

Firstrade's custodial account doesn't have contribution limits, custodian income limits or minimum deposit requirements. You can withdraw the money for any purpose without time restrictions, as long as it is for the benefit of the minor.

Custodians can invest in stocks, bonds, mutual funds and ETFs. However, these Firstrade accounts are only available in the U.S.

Conclusion

Opening and managing an individual account is a smart way to launch your investing activities and test the ropes.

But there are more options that, while more complex, let you build wealth with a partner in a joint investment account, or stow away money for a child and qualify for significant tax benefits.

While M1 Finance offers both individual and joint investing accounts, they do not have custodial accounts on their roster. For this type of account, you may want to look into Firstrade.

Article written by Cari Scribner
Cari Scribner is a career journalist with 20 year’s experience writing for newspapers and magazines. Now a freelance writer, she is also a published fiction writer with more than 15 short stories in literary mags. She recently completed a novel that is on the desk for consideration at two publishing houses. She lives with her two small dogs, Miloh and Lucy, in Upstate NY.

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