Other Investment Accounts
Most investors will never have to deal with the following types of investment accounts. They fit very specific needs and if you do ever have to deal with them, you will probably have (or should enlist) the help of a professional.
We may revisit these topics in detail at a much later date, but for now, we’ll just have a quick briefing of each type so that you may be familiar with them.
Custodial Investment Accounts
Custodial – A custodial investment account allows an adult to invest on behalf of a minor. Custodial accounts are based on the Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA). Therefore, funds contributed to this type of account are considered irrevocable gifts and belong to the minor. Investors usually use this type of account to get their kids involved in investing at an early age, while providing adult supervision.
Guardianship – Guardianship investment accounts allow legal guardians to invest for a minor, elderly, or disabled person. This type of account allows for a court-appointed guardian to manage the assets for the financial security of the beneficiary. The guardian manages, but does not own the account. They can only use the assets for the beneficiary and are required to keep records for accountability.
Conservatorship – A conservatorship investment account mirrors the guardian type closely. The only difference is that conservatorships apply more towards adults who are severely disabled, suffer from mental illness, elderly people who no longer have the mental capacity to care for themselves, or adults who have developmental disabilities carried forward from childhood.
Estate Management Investment Accounts
Trust – Trust investment accounts are used to manage the assets belonging to an estate. The assets are managed by a trustee for the named beneficiaries. There are two kinds of trust accounts.
- Deceased (Testamentary): These kinds of trusts are set up based on the will of the deceased.
- Living (Non-Testamentary): These kinds of trusts are set up by a living person. They are usually set up to shelter assets from estate taxes. Living trust accounts are set up so the assets are placed in the legal title of the trust. The owner becomes the trustee and maintains full legal control of the assets while they are alive.
Estate – Estate investment accounts are created to manage the estate of a deceased person. They are managed by the administrator or executor of the estate.
Business Investment Accounts
Investment Club – Investment club accounts are created for people who pool their money to make joint investment decisions. Investment clubs cannot have more than 100 members and cannot issue securities (shares).
Business/Charity or Association – It’s an account for a business, charity, or association. Investment accounts for these types of entities are usually used to invest excess cash or cash reserves.
Posted by Long