What is a Custodianship? | IRS Definition of a Custodianship

Custodianship has a fairly broad definition. Any time an individual takes control of another person’s assets for their benefit, it’s considered custodianship. For example, a custodian could be a bank that protects the individual’s money, or a financial advisor that invests the money for them. Custodians don’t take ownership of the funds, but they do take control over the funds.

Custodians are a part of finance that’s regulated by a number of financial industries, including SEC. It’s important that custodians be aware of their responsibilities and what they can and cannot do in relation to the funds that they are managing.

Since custodians can be bankers, brokerages, and more, understanding custodianship and the relationship requires understanding the actual relationship in question. However, a couple things remain consistent: the custodian does have to manage funds to the best of their ability and should obtain an EIN. If the custodian fails to do so, it can become a legal and regulatory issue.

Apply for a Federal EIN Number
Apply for a Federal EIN Number

 

Written by Maurice Mallory

Gov Easy LLC is an Authorized E-File Provider and helps clients obtain Federal Tax ID Numbers from the IRS. We are a business-to-business (B2B) application assistance and filing service and are not affiliated with the IRS or any other federal or state organizations. We do not provide legal, financial or other professional advice. We are not a law or an accountancy firm nor are we affiliated with either. Users are able to obtain a Tax ID number on their own by working directly with the IRS, but they will not be able to use the streamlined application process or engage with e-mail support.