Transferring ownership of a custodial account at ETRADE can seem like a complex process, but with a clear understanding of the steps involved, it can be managed smoothly. This comprehensive guide will walk you through everything you need to know, from understanding the basics of custodial accounts to the specific forms and procedures at ETRADE.
Navigating the Transfer of a Custodial Account at E*TRADE
So, you're looking to transfer ownership of a custodial account at E*TRADE, perhaps because the minor beneficiary has reached the age of majority, or you need to make other changes. This is a significant financial step, and ensuring it's done correctly is crucial for the beneficiary's financial future. Let's break down the process step by step!
Step 1: Understanding Custodial Accounts and the Age of Majority
Before diving into the transfer process, it's vital to grasp what a custodial account entails and the key concept of the "age of majority."
What is a Custodial Account?
A custodial account (typically a Uniform Gifts to Minors Act, or UGMA, or a Uniform Transfers to Minors Act, or UTMA, account) is established by an adult (the custodian) for the benefit of a minor.
The custodian manages the investments in the account until the minor reaches a specific age.
Crucially, the assets in a custodial account are considered an irrevocable gift to the minor. This means once funds are placed in the account, they legally belong to the minor and cannot be reclaimed by the custodian or given to another person.
The funds in the account can only be used for the minor's benefit.
The Age of Majority: A Key Threshold
The "age of majority" is the legal age at which a minor is considered an adult and gains full control over their financial assets, including a custodial account.
This age varies by state, typically ranging from 18 to 21 years old. It's imperative to know the specific age of majority in the state where the custodial account was established, as this dictates when the transfer of ownership becomes legally mandated.
Once the beneficiary reaches this age, the custodian's control over the account generally ends, and the assets become the sole property of the now-adult beneficiary.
Step 2: Gathering Necessary Information and Documentation
Preparation is key to a seamless transfer. Before contacting E*TRADE, compile all the required information and documents. This will save you significant time and potential back-and-forth.
Account Information:
The ETRADE account number* of the custodial account.
The full legal name and date of birth of the beneficiary.
The full legal name and contact information of the current custodian.
Beneficiary's Identification:
Proof of the beneficiary's age: A photocopy of one of the following documents is typically required:
Birth Certificate
Driver's License
U.S. Passport
This is crucial to verify that the beneficiary has indeed reached the age of majority.
Custodian's Identification (if applicable):
Depending on the specific transfer scenario, the custodian's identification (e.g., driver's license, passport) might also be needed.
Financial Details (if transferring funds):
If you intend to transfer the funds to a new account at E*TRADE or another institution, have the details of that new account ready (e.g., account number, routing number for bank transfers).
Step 3: Initiating the Transfer Process with E*TRADE
E*TRADE has specific procedures for transferring ownership of custodial accounts. The most common scenario is when the minor beneficiary reaches the age of majority and assumes full control.
Contact E*TRADE Directly:
The most efficient first step is to contact ETRADE's customer service or their Beneficiary Services team directly*.
You can typically find their contact information on the E*TRADE website, often under "Contact Us" or "Support." They have dedicated teams for these types of account changes.
Explain clearly that you need to transfer ownership of a custodial (UGMA/UTMA) account because the beneficiary has reached the age of majority.
Request the "Change of Account Registration" Form:
E*TRADE, like many financial institutions, will likely require a specific form for this type of ownership transfer. This is often called a "Change of Account Registration" or "UGMA/UTMA Termination/Transfer" form.
You might be able to download this form directly from the ETRADE Forms & Applications section* of their website. If not, the customer service representative can direct you to it or mail it to you.
Filling Out the Form Accurately:
Carefully read all instructions on the form.
You will typically need to provide:
Details of the existing custodial account.
Information about the beneficiary (now the adult owner).
Information about the custodian.
The reason for the registration change (e.g., "Conversion from a UGMA/UTMA account to an individual account upon reaching age of majority").
Instructions for the new account (e.g., transfer to an existing ETRADE individual account, open a new ETRADE individual account, or transfer to an external account).
Step 4: Signature Requirements and Notarization/Medallion Signature Guarantee
This is a critical step that often causes delays if not handled correctly.
Who Needs to Sign?
The former minor (now adult beneficiary) typically needs to sign the form. By signing, they are acknowledging receipt of the assets and assuming full control.
In some cases, especially if transferring to a different account type or involving specific scenarios, the custodian's signature may also be required.
Always refer to the specific ETRADE form instructions* for precise signature requirements.
Notarization or Medallion Signature Guarantee:
For the transfer of assets in a custodial account, financial institutions usually require a notarized signature of the former minor or a Medallion Signature Guarantee.
What's the difference?
Notarization: A notary public verifies the identity of the signer and witnesses their signature. This is often sufficient for simple transfers to an individual account in the former minor's name.
Medallion Signature Guarantee: This is a much higher level of security, typically required for large asset transfers or changes in registration that involve a change in ownership beyond the minor simply reaching the age of majority (e.g., if the custodian is changing or funds are moving to a third party). A Medallion Signature Guarantee can usually be obtained at a bank or credit union where the signer has an account. It is more difficult to obtain than a simple notary, so check if it's truly required.
ETRADE's "UTMA/UGMA Change of Account Registration" form specifies that a notarized signature of the former minor is needed if transferring to an individual account in their name. A Medallion Signature Guarantee might be required in other instances.
Step 5: Submitting the Forms and Monitoring the Transfer
Once you've completed the forms and secured the necessary signatures and guarantees, it's time to submit everything to E*TRADE.
Submission Methods:
Mail: This is the most common method for submitting physical forms with original signatures/notarizations. E*TRADE will provide the mailing address on the form itself.
Secure Upload: Some financial institutions offer secure online portals to upload scanned documents. Check if E*TRADE provides this option for these types of forms, but usually, original documents with wet signatures are preferred for ownership changes.
Retain Copies:
Always make a copy of all submitted documents for your records before sending them to E*TRADE. This includes the completed forms, identification, and any other supporting paperwork.
Monitoring the Transfer:
After submission, keep track of the process.
Transfer times can vary, but E*TRADE will likely provide an estimated timeline.
You may receive updates via email or through your E*TRADE online account.
If you don't hear back within the expected timeframe, don't hesitate to follow up with E*TRADE customer service.
Step 6: Post-Transfer Considerations
Once the transfer is complete, there are a few final items to consider.
Confirmation of Ownership:
E*TRADE will typically send a confirmation statement or notification that the ownership transfer is complete. Verify that the account is now registered solely in the beneficiary's name.
Updating Beneficiaries:
If the former custodial account is now an individual brokerage account, the new adult owner should consider designating beneficiaries for their own account to ensure their assets are distributed according to their wishes in the future.
Tax Implications:
While the transfer of a custodial account upon reaching the age of majority is generally not a taxable event itself, future earnings and withdrawals from the account will be subject to the beneficiary's personal income tax. It's always advisable to consult with a qualified tax advisor for personalized guidance.
10 Related FAQ Questions
How to confirm the age of majority for my state when transferring a custodial account?
You can confirm the age of majority by checking your state's specific Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) statutes, or by contacting E*TRADE's customer service, who should be able to provide this information.
How to locate the "Change of Account Registration" form on the E*TRADE website?
You can usually find this form in the "Forms & Applications" section of the ETRADE website, often categorized under "Account Services" or "Tax & Legal." If you can't find it, contact ETRADE customer support for a direct link or to have it mailed to you.
How to get a Medallion Signature Guarantee if my bank doesn't offer it?
If your primary bank or credit union doesn't offer a Medallion Signature Guarantee, you may need to check with other larger financial institutions in your area, as they are typically provided by commercial banks, trust companies, and brokerage firms where you have an established account.
How to ensure a smooth transfer if the custodial account holds complex investments (e.g., options, illiquid assets)?
For complex investments, it's highly recommended to speak directly with an E*TRADE representative or a financial advisor. They can guide you on any specific considerations or steps needed to transfer or re-register these types of assets.
How to handle taxes on the custodial account's earnings before transfer?
Earnings within a custodial account are typically taxed to the minor at their tax rate, though some of the earnings may be subject to "kiddie tax" rules. The custodian is responsible for reporting these earnings annually. After the transfer, the new adult owner will be responsible for their own tax reporting. Consult a tax professional for detailed advice.
How to transfer a custodial account to another financial institution instead of E*TRADE?
To transfer to another financial institution, you'll initiate the transfer process with the receiving institution. They will typically have their own "transfer in" forms and will coordinate with E*TRADE (the delivering institution) to move the assets.
How to proceed if the beneficiary is unwilling or unable to assume control of the account upon reaching the age of majority?
If the beneficiary is unwilling or unable, it becomes more complex. You would need to consult with an attorney specializing in estate planning or trust law to explore options, which might involve establishing a trust or seeking legal guardianship, depending on the circumstances.
How to change the custodian of a custodial account before the minor reaches the age of majority?
Changing a custodian typically requires specific legal documentation and approval from the financial institution. You would need to contact E*TRADE and inquire about their process for changing the custodian, which usually involves new forms and potentially legal agreements.
How to close a custodial account and distribute funds directly to the beneficiary after they reach the age of majority?
Once the beneficiary reaches the age of majority, they can typically request to close the account and have the funds distributed directly to them (e.g., via check or electronic transfer to their bank account). This would involve completing a distribution request form from E*TRADE.
How to get help from E*TRADE if I encounter issues during the transfer process?
If you encounter any issues, the best course of action is to contact E*TRADE's customer service directly. They have dedicated support teams for account transfers and can provide personalized assistance, clarify requirements, and troubleshoot any problems.
