Custodial Users and Accounts

Phase 1 - Customer Onboarding

API Reference

Overview

  • 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
  • There are 2 types of custodial accounts: UGMA and UTMA, which are available only to U.S. Citizens. These accounts are offered under the Uniform Gifts to Minors Act (UGMA), and the Uniform Transfers to Minors Act (UTMA).

  • As of 2022, all states offer UGMA accounts and 48 states offer UTMA accounts (Vermont and South Carolina do not offer these accounts). UTMA rules are more flexible than UGMA in that they allow several different categories of assets to be transferred to a minor, whereas UGMA accounts are specific to securities. Although rules vary from state to state, UTMA accounts generally pass to the minor at the age of 21, whereas UGMA accounts are transferred to the minor when they reach 18.


UTMA

Key Considerations

  • All gifts into an UTMA account are irrevocable
  • The funds deposited to the account cannot be returned to the donor/transferor who transferred the monies or assets
  • The Custodian may utilize the funds in the account for the use and benefit of the minor in any amount the Custodian considers advisable without Court order and without any regard to the duty or ability of the Custodian personally, or any other person to support the minor, and without regard to the minor’s property and income
  • During the time the custodial account is in existence the Custodian shall collect, hold, manage, invest and reinvest the custodial property in accordance with the standard of care that would be observed by a prudent person dealing with the property of another
  • The Custodian must at all times keep the custodial property separate and distinct from all other property.

Tax Rules

  • The IRS allows qualifying gifts into custodial accounts to be exempt from the gift tax of up to $15,000 per person or $30,000 for a married couple (rules/limits may vary by tax year).
  • The minor’s social security number (SSN) is used for tax reporting purposes on the UTMA
  • 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.)

Creating a Custodial Account

  • A new custodial user and account must be created for each child a parent may have

  • Custodial users are not allowed to place orders - all trade instructions MUST come from the parent

  • Creating a custodial account requires the establishment of two users; one for the parent, which holds the account, and one for the beneficiary, which is linked to the account


Step 1

  • Create the Parent User the Custodial account lives under - the requests use the Standard "Create User" API call

Step 2

  • Next Create the Beneficiary (a.k.a custodial) User assigned to the account

  • userType changes when creating a child user to CUSTODIAL

    • Failure to make this change will cause failure when attempting to create the custodial account under the parent
  • The data.userID found within the "Custodial Data object" takes the value of the userID generated from the POST request made in STEP 1

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

Step 3

  • Next Create the Account underneath the Parent User

2 Types for Custodial Accounts:

  • accountManagementType:
  • `CUSTODIAL - Used for self-directed trading
  • `CUSTODIAL_MANAGED - Used for discretionary trading, and is required for Partners utilizing AutoPilot
  • The authorizedUsers object takes the userID from the CUSTODIAL user created in STEP 2, and the permission properties passed in can be defaulted to the following values:
  • EXAMPLE:
{
	"userID": "fa1336af-02a3-2a82-d1a8-ccf11ecea398",
	"accountType": "LIVE",
	"accountManagementType": "CUSTODIAL",
	"tradingType": "CASH",
	"authorizedUsers": [{
		"userID": "628e8583-6853-88ea-5443-e7b2224ac9ce",
		"permissions": ["ACCOUNTS_GET","REPORTS_GET"]
	}]
}'
  • EXAMPLE:
{
	"userID": "fa1336af-02a3-2a82-d1a8-ccf11ecea398",
	"accountType": "LIVE",
	"accountManagementType": "CUSTODIAL",
	"tradingType": "CASH",
	"authorizedUsers": [{
		"userID": "628e8583-6853-88ea-5443-e7b2224ac9ce",
		"permissions": ["ACCOUNTS_GET","REPORTS_GET"]
	}]
}'