Securities Trader Representative (Series 57) Practice Exam

A custodial account is specifically designed to allow an adult to manage investments on behalf of a minor. This type of account is established under the laws of a particular state, which typically specifies how assets held in the custodial account must be managed. The adult, known as the custodian, has full control over the account and is responsible for making investment decisions until the minor reaches the age of majority, at which point the assets in the account are transferred to the minor.

Custodial accounts can be useful for various purposes, including saving for a minor's educational expenses, but they are fundamentally outlined as a vehicle for an adult to manage assets for a child until they are able to take control themselves. This makes managing, investing, and eventually distributing the assets to the minor straightforward and structured.

This understanding clarifies why the other choices do not align with the definition of a custodial account. For instance, a retirement account for individuals over 60 (the first option) focuses on retirement planning rather than asset management for minors. Similarly, accounts for future education expenses (the third option) do not inherently include the stipulation of adult oversight and management like a custodial account does. Lastly, a joint account between two adults (the fourth option)