A Merrill Edge custodial account (UGMA/UTMA) lets parents, grandparents, and guardians invest on behalf of a minor using Merrill Edge’s brokerage platform — with the added advantage of Bank of America integration through the Preferred Rewards programme. No minimum balance, $0 commissions on stocks and ETFs, and access to BofA Global Research reports.
What Is a Merrill Edge Custodial Account?
A Merrill Edge custodial account is a UGMA or UTMA brokerage account managed by an adult custodian on behalf of a minor. The custodian controls all investment decisions until the minor reaches the age of majority:
- UGMA: Typically 18 in most states
- UTMA: 18–21 depending on state
At the age of majority, the account transfers to the adult child as a standard Merrill Edge brokerage account.
Key features:
| Feature | Detail |
|---|---|
| Account types | UGMA or UTMA |
| Minimum to open | $0 |
| Monthly fee | $0 |
| Commissions (stocks/ETFs) | $0 |
| Mutual funds | Thousands (no-transaction-fee) |
| iShares ETFs | $0 commission |
| BofA Preferred Rewards | Custodial balance counts toward tier |
| Research | BofA Global Research + Morningstar |
| Age of majority | State-dependent (18–21) |
The BofA Preferred Rewards Advantage
Merrill Edge’s unique differentiator for custodial accounts: balances count toward Bank of America Preferred Rewards tiers. If you’re building a custodial account for your child alongside your own Merrill account and BofA banking, combined balances unlock:
| Tier | Combined balance | Rewards |
|---|---|---|
| Gold | $20,000+ | 25–75% BofA credit card bonus; 30 free options/month |
| Platinum | $50,000+ | 25–75% bonus; 60 free options/month |
| Platinum Honors | $100,000+ | 25–75% bonus; 100 free options/month |
A growing custodial account for your child can help push your combined household balances toward higher reward tiers. Note: the child’s account is managed by you, and the rewards accrue to you as the custodian.
Investment Options
A Merrill Edge custodial account provides access to:
- US stocks — any NYSE/Nasdaq-listed stock
- ETFs — all major ETFs commission-free; iShares ETFs (BlackRock) are Merrill’s preferred brand
- Mutual funds — thousands of no-transaction-fee options
- Bonds and CDs — Treasuries, corporate bonds, CDs
- Options — subject to custodian approval
- BofA Global Research — institutional equity research for informed decision-making
Best ETFs for a Merrill Edge Custodial Account
Since iShares ETFs are prominently featured at Merrill Edge, these are natural choices:
| ETF | Expense ratio | Strategy |
|---|---|---|
| IVV | 0.03% | S&P 500 (iShares equivalent of VOO) |
| ITOT | 0.03% | US Total Market (iShares equivalent of VTI) |
| IXUS | 0.07% | International stocks |
| AGG | 0.03% | US Bond Market |
| IEMG | 0.09% | Emerging Markets |
Simple portfolio: 70% ITOT + 30% IXUS = ~0.05% blended cost for global equity coverage.
Tax Rules: Kiddie Tax and Custodial Accounts
A Merrill Edge custodial account is a taxable account. The Kiddie Tax applies to dependent children under 19 (or under 24 if a full-time student):
| Income tier (2026) | Tax treatment |
|---|---|
| First $1,300 | Tax-free |
| Next $1,300 | Child’s lower rate |
| Above $2,600 | Parent’s marginal rate |
Choose low-dividend, low-turnover ETFs (like ITOT or IVV) to minimise annual taxable distributions. Avoid high-yield dividend funds in a custodial account unless you’ve accounted for the Kiddie Tax impact.
FAFSA Impact
Custodial account assets count as the student’s assets on the FAFSA, reducing financial aid eligibility by up to 20% per year. For families who plan to apply for need-based aid, consider whether a parent-owned 529 plan (5.64% impact) or Roth IRA (not counted) might be more advantageous.
Worked Example: Merrill Edge Custodial with Regular Contributions
Parents open a Merrill Edge custodial account for a child at age 3 and invest $100/month in ITOT (0.03%):
| Age | Contributions | Estimated value at 7% annualised |
|---|---|---|
| 8 | $6,000 | ~$8,700 |
| 13 | $12,000 | ~$23,400 |
| 18 | $18,000 | ~$45,700 |
At 18 or 21 (state-dependent), the child receives the full account balance — an 18-year compounding head start.
Merrill Edge vs. Fidelity Custodial Account
| Feature | Merrill Edge | Fidelity |
|---|---|---|
| Zero-fee funds | iShares ETFs at 0.03% | Fidelity ZERO at 0.00% |
| BofA banking integration | Yes (Preferred Rewards) | No |
| Research tools | BofA Global Research | Moderate |
| Fractional shares | Limited | Yes (fractional ETFs) |
| Robo-advisor | Merrill Guided Investing | Fidelity Go |
| Best for | BofA customers | Fidelity customers; ZERO fund users |
Fidelity’s ZERO funds (0.00% expense ratio) give it a cost edge. Merrill Edge’s Preferred Rewards integration gives it an advantage for existing BofA customers.
How to Open a Merrill Edge Custodial Account
- Log in to Merrill Edge (or create an account via merrilledge.com)
- Navigate to “Open Account” → select “Custodial Account”
- Enter your information as custodian and the minor’s details including Social Security Number
- Fund the account via bank transfer (seamless from BofA accounts) or check
- Begin investing — ITOT (iShares US Total Market, 0.03%) is a natural starting point
Internal Links
- Merrill Edge vs. Fidelity comparison
- Merrill Edge Preferred Rewards guide
- Merrill Guided Investing review
- How to open a Merrill Edge account
- Merrill Edge vs. Schwab comparison
- Merrill Edge investing hub
Bottom Line
A Merrill Edge custodial account is the natural choice for Bank of America customers who want to consolidate family finances in one ecosystem. The Preferred Rewards integration, BofA Global Research, and iShares ETF access make it a capable custodial account — comparable to Fidelity and Schwab but with the added BofA banking synergies. Fidelity’s ZERO funds hold a cost edge, but for BofA households Merrill Edge’s integration is often more valuable.
This article is for educational purposes only. Consult a tax professional for personalised guidance. All investments carry risk, including the possible loss of principal.
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