Definition of Custodial account:
The term custodial account generally refers to a savings account at a financial institution, mutual fund company, or brokerage firm that an adult controls for a minor (a person under the age of 18 or 21 years, depending on the laws of the state of residence). Approval from the custodian is mandatory for the account to conduct transactions, such as buying or selling securities.
In a broader sense, a custodial account can mean any account maintained by a fiduciarily responsible party on behalf of a beneficiary, such as an employer-based retirement account handled for eligible employees by a plan administrator. A fiduciary is bound ethically and legally to act on the best behalf of another's interests.
Bank, brokerage, or other kind of account established for a minor or beneficial owner but managed by a parent, custodian, or registered owner. Also called custody account. See also nominee account.
How to use Custodial account in a sentence?
- A custodial account is a savings account set up and administered by an adult for a minor.
- Custodial accounts do not require distributions at any point.
- Custodial accounts have enormous flexibility with no income or contribution limits, or withdrawal penalties.
- Gifts to a custodial account are irrevocable.
- The account's holdings irrevocably pass into the minor's control when they come of age depending on their state of residence.
Meaning of Custodial account & Custodial account Definition