The term custodial agreement refers to an arrangement whereby a nominee holds the assets or property on behalf of the beneficial owner. Custodial agreements are typically associated with benefits programs offered by companies and government agencies.
Custodial agreements are oftentimes entered into by employees when participating in an employer's retirement plan such as a 401(k) or 403(b). These arrangements provide employees with the benefit of having the funds in their account managed by investment professionals. Through regular payroll deductions, the custodian can collect and invest the employee's funds. The fees associated with these agreements are oftentimes lower than those charged individual investors.
Custodial agreements are typically lengthy documents, explaining the following topics in great detail: