A custodianship arises when a third party, usually a large financial firm, becomes in charge of another individual’s assets, usually for the purposes of investment. For some investments, the custodianship accounts may remain under the individual’s own tax ID or EIN. For other accounts, the custodianship account may remain under a separate EIN/tax ID until the individual themselves has dissolved the account or taken its profit. Because custodianship is so broad (it governs many investment accounts), it can operate in a variety of ways. Some custodian banks include Citigroup and JPMorgan Chase.
When creating an account under custodianship, the individual opening the account will not need to worry about the tax ID or EIN. The custodian of the account will manage the accounts for them and will apply for an EIN or structure the account as is needed. Most investors are already in a relationship with a custodian account, and these accounts are strictly regulated and monitored to ensure that the custodian is doing their best to manage the individual’s money, regardless of the risk relative to the individual transactions.