Definition

1. Noun:
   • A financial account established for a minor: A custodial account is a type of financial account, such as a bank or brokerage account, that is created by an adult (the custodian) for the benefit of a minor child. The assets in the account are owned by the minor, but are managed by the custodian until the minor reaches the age of majority.
   • A legal arrangement for asset management: It refers to the legal structure where a custodian holds and controls assets on behalf of a beneficiary who is not yet legally able to manage them independently.

Usage

• A custodial account is used to hold and invest gifts of money or securities for a child.
• The custodian has a fiduciary duty to manage the account prudently for the minor's benefit.
• Control of the account transfers to the beneficiary once they reach the age specified by law (e.g., 18 or 21, depending on the state).

Examples

• Noun:
  • Her grandparents opened a custodial account to save for her college education.
  • The funds in the custodial account can only be used for expenses that benefit the child.
  • As the custodian, he is responsible for filing tax returns for the custodial account.

Advanced Usage

• "UGMA/UTMA custodial account": Refers to accounts established under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA), which are common types of custodial accounts in the United States.
  • They set up a UTMA custodial account to transfer ownership of the stock to their daughter.

Variants and Related Words

• Custodian (n): The person or entity (like a trust company) responsible for managing the custodial account.
  • The parent is named as the custodian on the account.
• Custodial (adj): Relating to the function of being a custodian or guardian.
  • The parent has custodial responsibility over the assets.

Synonyms

• Guardianship account: An account managed by a legal guardian for a ward.
• Minor's account: A general term for an account in the name of a minor.

Related Phrases

• To open a custodial account: The act of establishing this type of account.
  • They decided to open a custodial account for each of their children.
• To manage a custodial account: The act of overseeing the investments and transactions within the account.
  • It is important to manage a custodial account with the child's best interests in mind.

Noun

1. a brokerage firm account that parents have created for a minor