Custodial Account at WSFS Bank

A custodial account at WSFS Bank is a financial account established by an adult custodian (often a parent, guardian, or other responsible party) for the benefit of a minor or legally dependent individual. The account is managed by the custodian until the beneficiary reaches the age of legal majority as defined by state law, at which time the assets are transferred to the beneficiary. Custodial accounts are a flexible and accessible way to save for education, first home expenses, special needs support, or any long-term goal that benefits a minor while allowing the custodian to retain control of transactions and investments during the custodial period.

Key Features

• Custodian-controlled management: The named custodian has authority to deposit, invest, and withdraw funds for the benefit of the minor, always acting in the beneficiary’s best interest.
• Single and multiple beneficiaries: Accounts can be opened for one beneficiary or structured to accept gifts from multiple contributors on behalf of the named minor.
• No formal trust required: Custodial accounts provide a straightforward alternative to trusts for many families, with simplified setup and lower administrative requirements.
• Transfer of ownership: When the beneficiary reaches the age specified by state law (commonly 18 or 21), account ownership transfers automatically to the beneficiary without the need for probate.
• Flexible contributions: Family members and friends may contribute to the account, subject to applicable gift tax rules and contribution limits under law.

Benefits

• Goal-focused savings: Custodial accounts encourage disciplined saving specifically for the beneficiary’s future needs.
• Simplicity and accessibility: Compared with some formal trust structures, custodial accounts are easier to establish and maintain, making them a practical solution for many families.
• Liquid and versatile: Funds can typically be used for a wide range of purposes that benefit the minor, such as education, healthcare, housing costs, or other qualifying expenses.
• Financial education: Custodial accounts offer a teaching opportunity: custodians can involve beneficiaries in age-appropriate discussions about saving, investing, and financial responsibility.

How It Works

To open a custodial account with WSFS Bank, an adult custodian provides required identification and completes account opening documentation designating the minor as the beneficiary. The custodian retains control of the account and is responsible for managing deposits, transfers, and any investment choices allowed within the account type. The custodian must act prudently and in the best interest of the beneficiary. Once the beneficiary reaches legal majority, the custodian is required to transfer ownership of the account and its assets to the beneficiary.

Account Types and Investment Options

Custodial accounts may be offered in various forms, including savings-style custodial accounts that earn interest, custodial certificates of deposit, or custodial investment accounts that allow investments in mutual funds, money market funds, and other permitted securities. Investment options and account features depend on the specific custodial product chosen and applicable regulatory or bank policies. Custodians should review available options to align with the family’s time horizon, risk tolerance, and financial goals.

Costs and Fees

Fee structures vary by account type and selected services. Some custodial savings accounts may have minimal fees, while custodial investment accounts might include transaction fees, fund expense ratios, or account maintenance charges. Custodians should review the bank’s fee schedule and account disclosures to understand any charges that could affect long-term returns. Many families find custodial savings accounts to be a low-cost way to begin saving, while investment-focused custodial accounts may carry higher costs in exchange for growth potential.

Tax Considerations

Interest, dividends, and capital gains generated by custodial accounts are generally taxable to the beneficiary. Depending on the account balance and income amounts, a portion of investment income may be taxed at the beneficiary’s tax rate or may trigger a special tax calculation applicable to unearned income of minors. Gift tax rules may apply to contributions from adults. Since tax laws change and individual circumstances vary, custodians should consult a qualified tax professional for personalized guidance on reporting, potential tax benefits, and strategies to minimize tax liability.

Custodial Responsibilities

• Fiduciary duty: The custodian must manage the account prudently and solely for the benefit of the minor.
• Record keeping: Maintain accurate records of contributions, withdrawals, and account activity to demonstrate funds were used for the beneficiary’s benefit.
• Timely transfer: When the beneficiary attains the age of majority as required by state law, the custodian must transfer full control of the account to the beneficiary.

Opening, Managing, and Closing the Account

Opening a custodial account typically requires the custodian’s and beneficiary’s information and appropriate identification documents. Once open, accounts can be funded by the custodian, family members, or other contributors. Withdrawals should be made for legitimate expenses that benefit the minor. If the custodian needs to change or resign, state law governs replacement procedures; the bank can provide guidance on documentation required. To close the account, the custodian may liquidate assets and distribute funds in accordance with custodial rules, or transfer ownership to the beneficiary at maturity of the custodial term.

Who Should Consider a Custodial Account?

Custodial accounts are suitable for parents, grandparents, guardians, and other adults who want a simple, flexible way to save or invest on behalf of a child. They are particularly useful for families seeking an accessible savings vehicle without establishing a formal trust. Custodial accounts can complement other college savings strategies or estate planning tools, depending on each family’s objectives.

Final Considerations

A custodial account at WSFS Bank provides a practical means to build savings and investments for a child’s future while allowing an adult custodian to manage funds responsibly on the child’s behalf. Prospective custodians should evaluate account types, fees, investment choices, and tax implications to ensure the custodial arrangement aligns with their financial goals and the beneficiary’s needs. For clarity on specifics such as available account variants, investment options, state-specific rules, and documentation requirements, review the bank’s account disclosures and consult trusted financial or legal advisors when appropriate.

Address Bank: Wilmington, Delaware, U.S.
Bank: WSFS Bank
Headquarters: Wilmington, Delaware
Products: Deposit Accounts
Type: Custodial Account