What type of investment accounts are available through Greenlight?

What type of account is Greenlight’s Investing for Parents account?

Greenlight’s Investing for Parents account is an easy, flexible way for parents to invest for their kids’ futures. As a brokerage account in the parent’s name, this account provides flexibility around when investments can be sold and how they can be spent. 


What type of account is Greenlight’s Investing for Kids account?

Greenlight's Investing for Kids account is a brokerage account held in the parent’s name that is used as an educational tool for kids. Within the "Invest Module" of your child’s dashboard, kids can research stocks and ETFs and request that the primary parent place buy or sell orders using their Cash to Invest account balances.

After a trade is requested, these trades are presented to the parent who can choose to either place the trade or reject the request. Therefore, the parent is actually making the final investment decision whenever any securities are purchased or sold.

While any securities purchased will appear in the child’s Invest Module, the parent will, at all times, remain the record owner of any securities purchased by the broker-dealer and will be responsible for filing all taxes associated with such securities.


Is Greenlight’s investing account a standard brokerage account, a 529 plan, or a custodial account?

Greenlight’s investing accounts are neither 529 nor custodial accounts (UGMA/UTMA). All investing portfolios created with Greenlight are standard brokerage accounts held in the primary parent’s name. This means that, unlike 529s or custodial accounts, there are no limitations as to when you can sell off your assets or how you can spend the proceeds after selling.

Additionally, this means that there is no automatic transfer of your portfolio when your child comes of age, meaning parents remain in full control of what they would like to do with the investment portfolio when the child comes of age. The primary parent on the Greenlight account  will be the record owner of all securities purchased and they will be responsible for filing all associated taxes. 


What’s the difference between Greenlight’s investing account (standard brokerage), a 529 plan, and custodial accounts?

As a standard brokerage account, Greenlight’s investing portfolios have no limitations on how funds can be spent (like a 529 does), nor are there penalties associated with withdrawing funds before a designated time (as with 529 accounts and custodial accounts.) Additionally, parents that invest through Greenlight will have full control over how they would like to use the investments they have made towards their kids’ futures, as there is not a direct transfer of a portfolio to the child when they come of age. Instead, all assets remain in the name of the primary parent.

Meanwhile, with a custodial account (UGMA/UTMA), all assets within an investing portfolio would transfer directly to the child to do with as they please when they come of age (18 or 21 depending on the state). With a 529 plan, there are limitations on how investments can be spent-- items must generally be related to educational expenses, like college, and each 529 plan can only be used by the designated child unless it is transferred from one child to another. 

Learn about the differences between 529s, Custodial Accounts, and Greenlight’s investing feature on our blog here. 


*Please note: All investing accounts set up within the Greenlight app are brokerage accounts in the Primary Accountholder’s name. The Primary Accountholder is the sole individual responsible for placing trades, the owner of record for securities held in the accounts, and will be responsible for filing all taxes associated with such securities.

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