A custodial trust agreement is an arrangement between two people where one party holds an asset as a custodian on behalf of the real owner.
A custodial trust agreement is one of many types of trusts. Trusts allow one party to hold property for another. All trusts have donors, trustees and beneficiaries. A donor names the trustee and beneficiaries when the trust is created. Assets are then transferred to the trustee, who manages them.
Read More: Definition of Trust Agreement
The Uniform Custodial Trust Act (UCTA) came about in 1987 for the purpose of giving all people a chance to establish a trust. The UCTA is designed to make these trust agreements inexpensive and simplified.
When a person creates a custodial trust, he maintains control over all assets named in the trust until he becomes incapacitated or dies. If the person becomes incapacitated, the trustee manages the assets. When the person dies, the beneficiary takes control of them. The beneficiaries in a custodial trust agreement limit the trustee’s power, making the trustee a custodian. The beneficiaries of the agreement have the power to cancel the agreement at any time they choose.
Jennifer VanBaren started her professional online writing career in 2010. She taught college-level accounting, math and business classes for five years. Her writing highlights include publishing articles about music, business, gardening and home organization. She holds a Bachelor of Science in accounting and finance from St. Joseph's College in Rensselaer, Ind.