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DEFINITION:
A custodian protects your securities (a financial item that has a monetary value) or tangible assets from theft or loss.
Understanding custodians
Custodians are usually large, well-known companies, such as banks. They hold your financial assets in custody, whether electronically or physically. A custodian is responsible for the security of the investments you deposit, such as stocks, bonds, jewelry and gold. When you make a bank deposit into a custodial account, it goes directly to your custodian with your account number. For some custodial accounts, the Internal Revenue Service requires that the custodian be a bank, savings and loan association, or federally insured credit union, or have express written authorization from IRS.
Takeaway
A custodian is like a safe…
A vault keeps your valuables safe, just as a custodian keeps your electronic and physical assets. It protects your assets from theft, loss, and unauthorized access. You can access your assets when needed, but the custodian acts as an intermediary and keeps them safe in the meantime.