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A custodian account is opened by one custodial individual for the benefit of a minor. This is considered a fiduciary account where the adult makes all financial and investment decisions on the account.
The account is subject to the UGMA - Uniform Gift To Minors Act or UTMA.
Custodial accounts with a financial advisor or brokerage firm are under state laws. These accounts are normally used for children of estates, education investments and other circumstances or services.
Custodial Investments
Securities and investment made in the account are done for the benefit of the minor. All transactions must be done in a cash account. No margin trading is allowed.
Securities can include: Stocks, Bonds and Mutual Funds.
A financial advisor will normally work on a percentage of the total net assets managed in the custodial account. A commission is not used for advisory work. This means if the investment advisor is earning a fee on the assets, the planner can charge commission on the trading services by transaction.
A custodial account can be a wise choice if the minor has significant money to their name.
Copyright  2006 American Investment Training, Inc.
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