Custodial accounts

A custodial account is an account set up on behalf of, or “in custody for” an individual, typically a minor child (18 or younger) or a medically impaired individual. Once a custodial account is established, the person setting up the account no longer has unlimited control over the assets in the account.

Key considerations

• All gifts into an UTMA accounts are irrevocable
• The funds deposited to the account cannot be returned to the donor/transferor who transferred the money or assets
• Custodial users are not allowed to place orders—all trade instructions MUST come from the parent/Custodian
• The property in the account is owned by the minor. The assets in the account may be taken into consideration when the minor is conducting other financial transactions (financial aid, scholarships, public assistance, etc.)

Tax differences

The minor’s social security number (SSN) is used for tax reporting purposes. Refer to Tax handling for circumstances where this may be applicable

Creating a custodial Account

Creating a custodial Account requires the establishment of two users; one for the parent, which holds the account, and one for the child, which is linked to the Account. Because two Users are required, opening a custodial Account follows the following steps:

Step 1: Onboard the parent

Create the parent using the standard Create User API. The parent userType will be set to: INDIVIDUAL_TRADER.

Step 2: Onboard the child

When onboarding the child user, the userType must be set to CUSTODIAL. Note that failure to make this change will cause a failure when attempting to create the custodial Account under the parent.

The child user also requires use of the CUSTODIAN_INFO digital document. Set the userID field of the CUSTODIAN_INFO document to the userID of the parents User received in step 1.

{
      "type": "CUSTODIAN_INFO",
      "data": {
        "userID": "fa1336af-02a3-2a82-d1a8-ccf11ecea398"
      }
}

Step 3: Open the Account

Using the parents userID, open the Account utilizing the Accounts API. By adding the child's User ID to the authorizedUsers object, the child User now has defined permission to receive read only information on the Account—such as the holdings of the Account.

POST /back-office/accounts

{
    "userID": "fa1336af-02a3-2a82-d1a8-ccf11ecea398",
    "accountType": "LIVE",
    "accountManagementType": "CUSTODIAL",
    "tradingType": "CASH",
    "authorizedUsers": [{
        "userID": "628e8583-6853-88ea-5443-e7b2224ac9ce",
        "permissions": ["ACCOUNTS_GET","REPORTS_GET"]
    }]
}

Note that there are two available accountManagementType options available for custodial accounts:

1. CUSTODIAL: Used for self-directed trading—the parent will choose their own investments without discretionary advice.
2. CUSTODIAL_MANAGED: Used for discretionary trading and robo-advisory. This management type is required for partners utilizing Automated trading.