When a financial institution is given the authority to manage an individual’s assets, securities and investments, this is known as a custodianship. The firm or custodian is responsible for administering the accounts, paying dividends and interest, completing transactions and paying taxes using a trust tax ID number from the IRS. You can obtain this number the same business day by applying through IRS-EIN-Tax-ID.
How Custodianship Works
If you choose to have your assets managed by a custodian, you will deposit your funds with that institution, who will in turn invest them as instructed with your approval after deducting the previously agreed-upon fee. He or she will provide a monthly or quarterly statement that details your holdings. The custodian will also ensure that you receive dividends from the stocks you own and report your earnings to the IRS as needed using the EIN number you’ve established.
Choosing a Custodian
Because a custodian will have access to your investment accounts, it’s important to choose a reputable individual or firm. Ask these questions when selecting custodianship:
- Will a dedicated individual be assigned to my account?
- Whose name is on the custodial account? You should be listed as the principal with the custodian as an approved agent.
- Do you provide statements at least quarterly?
- What fees do you charge?
- How are discrepancies in account statements resolved if a question arises?
Although the Securities and Exchange Commission has measures in place to protect investors, you must also be diligent when trusting a custodian with your assets. Even if you have a financial advisor who provides information to support your investment activities, he or she is not responsible for keeping your assets secure like a custodian is.
Once you’ve decided to enter a custodianship, visit IRS-EIN-Tax-ID to apply for an employer ID number (EIN) using our secure online application. We’ll guide you through IRS Form SS-4 and you’ll receive your number within one business day.