Q: Is it possible and legal for a grandparent to set up a joint brokerage account with a grandchild? If so, the grandparent could deposit an annual gift to the child together with a matching amount, pay the taxes, manage the investments and if necessary have access to the funds in an emergency.

A: The answer to your first question is pretty straightforward: Yes, it is possible and legal for a grandparent to set up a joint brokerage account, as long as the grandchild is at least 18. A person must be 18 or older to legally own securities in a brokerage account.

Assuming your grandchild is 18, both of you would sign a joint account agreement, according to Parker/Hunter Senior Vice President Bill McDonnell, head of the Downtown brokerage firm's retirement planning unit.

You could manage the account and would have access to it. But keep in mind that as a joint account holder, your grandchild could withdraw money, too. At Parker/Hunter, a check would be issued in both account holder's names, unless you set up the account so that each of you have separate check-writing privileges. Technically, your grandchild also could manage the investments, but that rarely happens, McDonnell said.

I'm not sure what you mean when you say you would make annual deposits plus "a matching amount." In any case, joint accounts require only one Social Security number for tax reporting purposes. So if you open the account using your number, you would pay the income taxes owed on investment earnings, McDonnell said.

The main advantage to your plan is avoiding probate and ensuring that the assets in the account automatically go to your grandchild upon your death.

That's also one of the drawbacks. You won't be able to leave the account to another heir if you change your mind, because your grandchild's rights to the account will supersede any instructions in your will.

There are a couple of other disadvantages to your plan, McDonnell said.

If your grandchild would end up getting sued for something, the account possibly could be accessed by creditors.

In the unlikely event that your grandchild died before you did, and the joint account was more than a year old, you would owe state inheritance taxes on half the value of the account, even if you made all the contributions.

As for gift taxes, you could deposit any amount in the account and not worry about paying federal gift taxes (there are no state gift taxes in Pennsylvania), since the deposit becomes a gift only when the grandchild makes a withdrawal, McDonnell said.

If your grandchild makes a withdrawal of more than $11,000 a year, you would have to file a federal gift tax return. But even then, you would owe taxes only if you had made lifetime gifts totaling more than $1 million in excess of $11,000 per year.

To sum things up, your proposal is legal and not out of the ordinary. But it's prudent to discuss the ramifications with a tax and estate planning attorney.

You may, for instance, want to ask about setting up a brokerage account called a transfer on death account, which could accomplish many of your goals with fewer drawbacks.