Unit 5 - Types of Accounts
Which of the following persons may legally open an account to trade on margin? A) A corporation. B) A custodian of an UTMA account. C) A minor child with approval of a court-appointed guardian. D) An open-end investment company.
Answer: A A corporation may open an account to trade on margin if provided for in the charter and authorized in the bylaws. Both UTMA and UGMA specifically prohibit custodians from either engaging in speculative trading or borrowing money or securities in the name of the minor through trading on margin. Mutual funds are also prohibited from trading on margin.
In order to comply with the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker/Dealers and Agents, which of the following is NOT required to open a margin account for a trust? A) A completed margin suitability form B) Approval of the account by the designated supervisory person C) A margin agreement D) Specific text in the trust agreement authorizing a margin account
Answer: A A margin account allows the customer to borrow money from the broker/dealer in order to buy securities. Although that does entail assuming greater risk on the part of the trust, there is no such thing in the Statement of Policy as a margin suitability form. However, under the Statement of Policy, the margin forms and agreements must be completed promptly after the initial margin trade. All accounts, not just margin, or trust accounts, require the approval of an appropriate supervisory person.
Which of the following statements regarding the handling of discretionary accounts are TRUE? Discretionary accounts must be reviewed frequently by the designated supervisory person. An investment adviser representative may decide, without discretionary authority, the security to buy or sell and the amount to buy or sell. A husband or wife may at any time exercise discretionary authority in the spouse's account without specific written authorization. An investment adviser representative may decide, without discretionary authority, the time at which to execute a trade. A) I and IV. B) I and III. C) II and III. D) II and IV.
Answer: A Discretionary accounts must be reviewed frequently by the designated supervisory person, and an investment adviser representative may decide both the time and price at which to execute a trade without discretionary authority. Only if he is to decide action (whether to buy or sell), asset (what to buy or sell), or amount (how much to buy or sell) is discretionary authority required.
One of your clients dies. You could legally take instructions regarding the individual's estate from A) the administrator in intestacy B) a CPA who prepared the deceased's tax return C) a person with durable power of attorney D) the spouse of the deceased
Answer: A If an individual dies without a will (intestate), the state will appoint an administrator in intestacy who, just as an executor for one who had a will, has control over the deceased's assets. A durable power of attorney, just like any other power, expires upon the death of either party to the power.
If three individuals open a joint account with your firm and one of the parties has written authorization from the other parties granting him authority to make all trading decisions, the new account form must contain information on: A) all three individuals. B) the individual granted trading authority. C) the individual with the highest net worth. D) any two of the three individuals.
Answer: A Information is needed on all three individuals because they all have ownership in the account.
Under the Uniform Transfer to Minors Act, the beneficial owner of the securities held in the account is the: A) minor. B) custodian. C) parent of the minor. D) donor of the securities.
Answer: A The minor is the beneficial owner of the securities in an UTMA account, although the securities are held in the custodian's name as owner of record.
Under the Uniform Transfers to Minors Act, Ralph wants to give some stock to his brother's son, Jose. Jose's father, Bob, is the legal guardian, but he has failed the Series 7 exam 11 times. Which of the following is CORRECT? A) Either Ralph or Bob can be the custodian. B) Uncle Ralph cannot be the custodian, because he is not the legal guardian. C) Bob cannot be the custodian because he is not qualified. D) Ralph can be the custodian only if the securities are on the legal list of the state.
Answer: A Under UTMA, a custodian is required. Any adult can be the custodian and there are no other specific requirements, nor does the custodian have to be a member of the family.
Which of the following occurs in a partnership account if one partner dies? A) The account is frozen until a new or amended partnership agreement is received. B) The surviving partners receive the deceased partner's share. C) The surviving partners are considered joint tenants. D) The surviving partners are considered joint tenants and receive the deceased partner's share.
Answer: A Upon a partner's death, a partnership account is automatically frozen until a new or amended partnership agreement is received. The deceased partner's share usually goes to an estate, not to the other partners.
John and his sister, Alice, open a margin account as JTWROS. John contributes $50,000 and Alice contributes $25,000. They have agreed that Alice will trade the account, and they will share in the profits and losses equally. As their agent, you would gather information regarding suitability for: A) both, because information regarding all owners is relevant. B) John, because he has made the larger contribution. C) Alice, because she will be trading the account. D) either, because in a JTWROS account the owners share equally.
Answer: A When determining suitability and making recommendations to the owners of a joint account, it is the agent's responsibility to know each and every customer regardless of their contribution or participation level.
An account may be opened in the name of all of the following EXCEPT a(n): A) insider. B) third party. C) partnership. D) control person.
Answer: B An individual may not open an account for a third party (another individual). A partnership account can be opened via a partnership resolution, which should designate who has authority to trade on behalf of the partnership. An account for a control person or affiliate can be opened, although restrictions on the sale of stock in the company may exist. An insider of a company may open an account, but he must exercise care to prevent illegal trades based on material nonpublic information.
Which of the following individuals may not open a joint account? A) Business colleagues. B) Parent and a minor. C) Two spouses. D) Three sisters.
Answer: B Any two or more persons can have a joint account, but a minor is specifically excluded from the definition of a person.
Terry Bolton opens a UTMA for each of his sons, Josh, age 12, and Drake, age 14. Under current tax regulations, after deductions and exemptions, how will the income in the UTMAs be taxed? Josh's income is taxed at his tax rate. Drake's income is taxed at his tax rate. Josh's income in excess of $2,100 is taxed at Terry's marginal tax rate. Drake's income in excess of $2,100 is taxed at Terry's marginal tax rate. A) II and III B) III and IV C) I and II D) I and IV
Answer: B Because the income on the UTMAs is not considered to be earned income, the kiddie tax rules apply. Currently (2015), children younger than 19 have such income in excess of $2,100 taxed at the parent's marginal tax rate.
Under both federal and state law, the concept of a discretionary account is defined. It would be considered discretion when an agent: A) makes the decisions in the account once the client assures the agent that the proper authorizations are in the mail. B) picks the specific security that is the subject of a transaction. C) can decide the specific price. D) can decide the specific time at which the transaction will be made.
Answer: B Discretion is the ability to pick the Asset (the specific security), the Action (buy or sell) or the Amount (the number of shares or bonds). Time and price are not discretionary and nothing can take place until the proper papers have been received and documented.
During a trip to visit grandchildren, one of your clients suffers a massive heart attack and dies, intestate. Directions for handling the account could only come from the: A) spouse. B) person appointed as administrator of the estate. C) person named as executor of the estate. D) person with a durable power of attorney.
Answer: B Dying intestate means that there is no valid will. In that case, the state will appoint someone as administrator of the estate with the responsibility of handling all of the affairs of the deceased. Only when there is a will is there an executor and a durable power of attorney is cancelled upon the death of either party to the power. Only if the account were registered as JTWROS with the spouse (or if the spouse were named the executor) would the spouse have any authority.
Ms. Abbot has a joint account with her sister. She enters a sell order in the account and instructs that the proceeds check be made out to her only. If your firm sends the check but makes it payable to both Ms. Abbot and her sister, this is an example of: A) an unlawful practice because the transaction was unauthorized. B) the proper joint account procedure. C) not following instructions, a prohibited practice under the Uniform Securities Act. D) an unfortunate error that can be reconciled with the broker/dealer through a process called reclamation.
Answer: B In joint accounts, either party may act. However, by law, all checks must be made payable to all owners so the firm is following required procedure.
Richard, Tim, Sam, and Fred have a regular golf foursome every weekend. During one of their outings, they decide that it is time that they did something constructive with their money and they should open an account with a brokerage firm. If the account is opened tenants in common, suitability information would be required for: A) each of the individuals, and if married, their spouses. B) each of the 4 individuals. C) only that individual with the authorization to trade the account. D) whichever person has been designated by the group as their spokesman.
Answer: B On any joint account, it is required to obtain suitability information on all of the account owners.
In the banking industry, the term POD refers to an account similar to the TOD designation used by broker-dealers. An old, but sometimes still used term to describe this kind of account is A) Passbook savings account B) Totten trust C) Revocable trust D) Demand deposit account (DDA)
Answer: B The name comes from a 1904 decision in a New York case called In re Totten. The court ruled that someone could open a bank account as a trustee for another person, who had no right to the money until the account owner died. The account owner is the trustee, in control of money that will eventually go to the trust beneficiary, and could change beneficiaries as desired. But whether the arrangement is called a Totten trust or a POD account, the result is the same.
Under the UGMA, the custodian may: A) grant trading authority to an unqualified third party. B) open a cash account. C) open a margin account for the beneficiary. D) pledge the securities in an UGMA account to secure a loan that will benefit the beneficial owner.
Answer: B UGMA accounts must be cash accounts, and the securities in the accounts cannot be pledged or hypothecated. The custodian may not grant trading authority to a third party unless that person is qualified to invest the funds as called for in the prudent investor rule.
An agent may open a joint account for which of the following? Lee and his 13-year-old son, Tom. Mary and Kelley, two adult college roommates. Jerry and Mark, friends and partners in business for more than 20 years. Melinda and her minor nephew, John, for whom she is guardian. A) I and IV. B) II and IV. C) II and III. D) I and III.
Answer: C Joint account owners share ownership of the account and must be adults. A minor may not legally exercise control over an account and may not be an owner of record of an account.
A fiduciary, acting in accordance with the UPIA, would choose investments on the basis of all of the following EXCEPT: A) other resources of the beneficiaries. B) transaction costs. C) general economic conditions. D) needs for liquidity, regularity of income, and preservation or appreciation of capital.
Answer: B Under the Uniform Prudent Investor Act, transaction costs are not a primary factor in a trustee's determination of which investments to choose for the trust. They may be a factor in determining where to execute the transactions. The key for the prudent investor is to use skill and caution examining all of the factors involved to meet the stated objectives.
During your annual review with your clients, Matt and Sally Eberhart, they indicate that they think it is time to start putting away some money for college for their 3 year-old son. They ask you to describe the advantage of using an UTMA account over a Coverdell ESA. You would likely point out all of the following as advantages EXCEPT A) there is no limit to the amount that can be contributed to an UTMA. B) contributions to the UTMA are made with after-tax dollars. C) there are no earnings limits for making UTMA contributions. D) withdrawals for other than qualified education expenses are not subject to any penalties.
Answer: B We're looking for a feature possessed by the UTMA that is not found in an ESA, but in both cases, contributions are made with after-tax dollars. Therefore, you would not describe that as an advantage. Unlike the ESA where couples earning in excess of $220,000 per year are not eligible to contribute, no such ceiling is imposed on those donating or transferring property to an UTMA. Unlike the ESA, where there is a 10% tax penalty on the earnings withdrawn for non-qualified eductional expenses, no such penalty applies to an UTMA. Unlike the ESA which has a $2,000 per year per child limit, there is no limit to the amount that one can give to an UTMA. However, unlike the ESA, where all earnings are tax-free if used for qualified educational expenses, earnings in an UTMA are taxable and, if over a certain amount, might be taxed at the parent's top marginal rate.
One of your long-time advisory clients has been critically injured in an automobile accident. The client is in the ICU at the local hospital, unable to communicate. You would be able to accept orders for the account A) from the client by getting a squeeze of the hand for a "yes" B) from a person who has a written durable power of attorney over the account C) from the client's spouse D) from the client's lawyer
Answer: B When a client is incapacitated, agents may transact business in the account only when they receive instructions from someone with proper authorization, in this case, a durable power of attorney.
If a new joint tenants with rights of survivorship account is opened by two related individuals, all of the following statements are true EXCEPT A) in the event of death, the decedent's interest in the account goes to the other party B) checks may be drawn in the name of either party C) orders may be given by either party D) mail may be sent to either party (with the permission of each party)
Answer: B While either party may enter an order, any money or securities delivered out of the account must be in the names of both owners.
A wealthy individual has established a trust and wishes to establish an account that permits the trust to engage in margin transactions. Which of the following statements regarding margin trading in trust accounts is TRUE? A) It is permitted if the trustee observes the prudent investor rule. B) It is permitted with the written approval of the beneficiary of the trust. C) It is permitted if provided for in the underlying documentation. D) It is not permitted.
Answer: C Although not a common practice, margin trading in a trust account is permitted only if it is specifically provided for in the trust agreement.
An agent is permitted to open all of the following customer accounts EXCEPT: A) a corporate account opened by the designated officer. B) a partnership account opened by the designated partner. C) an account in the name of Mrs. Jones opened by Mr. Jones. D) a minor's account opened by a custodian.
Answer: C An agent is not permitted to open an individual account in the name of a third person.
Terry Bolton employs his 2 sons in the family gardening business. Josh is 12 years old and was paid $2,000 for the year. Drake is 14 years old and was paid $3,000 for the year. Which of the following are correct statements regarding the taxation of the income? Josh's income is taxed at his tax rate. Drake's income is taxed at his tax rate. Josh's income is taxed at Terry's marginal tax rate. Drake's income is taxed at Terry's marginal tax rate. A) II and III. B) III and IV. C) I and II. D) I and IV.
Answer: C As the money paid is earned income, it is not subject to the kiddie tax rules, regardless of age.
Which of the following are discretionary orders? A customer sends a check for $25,000 to an agent and instructs the agent to purchase bank and insurance company stocks when the price appears favorable. A customer instructs an agent to buy 1,000 shares of ABC Corporation at a time and price determined by the agent. A customer instructs an agent to purchase as many shares of XYZ as the agent considers appropriate. A customer instructs an agent to sell 300 shares of LMN, Inc., when the agent deems the time and price appropriate. A) II and III. B) II and IV. C) I and III. D) I and IV.
Answer: C Discretion authorizes a representative to choose the security, the amount of shares, or whether to buy or sell. Time and/or price alone are not discretionary decisions.
A customer and his spouse own shares in the ABC Fund as joint tenants with rights of survivorship. If the customer dies, what happens to the shares in the account? A) Ownership of the shares must be determined by probate court. B) The account would be frozen until the estate was settled. C) The spouse would own all the shares. D) One-half of the shares would belong to the spouse, and the remaining half would be distributed to the customer's estate.
Answer: C In a JTWROS account, securities pass to the surviving owner. The account does not have to be frozen but can continue to enter orders.
A woman wishes to make a gift of securities to her niece's account under the Uniform Transfer to Minors Act, but the niece's custodian opposes the gift. All things considered, the woman may give the securities under which of the following circumstances? A) Only with the custodian's written approval. B) Only after obtaining the court's permission. C) As she desires. D) Only if the niece approves.
Answer: C In a custodial account for a minor, any adult, whether related or unrelated, can make gifts to an open UTMA account. However, all gifts are irrevocable.
An individual opens an account with your firm. She tells you that upon her death, she wants any assets in the account to be divided equally among her three children. She also wants the ability to change the allocation in the event that conditions change and one of the children is in greater need than the others, but she does not want to incur any significant legal expense. You would suggest that the account be opened: A) as a joint account with tenants in common. B) under a discretionary power. C) as an individual TOD account. D) as a joint account with right of survivorship.
Answer: C TOD, the term used for transfer on death, will allow this client to fulfill her wishes.
An agent taking which of the following actions would be committing a violation? A) Buying securities in a joint account at the request of one party only. B) Selling securities from a corporate account by using limited power of attorney trading authority for the account. C) Selling securities from a minor's custodial account without the custodian's consent but with the beneficial owner's consent. D) Buying securities in a cash account with the consent of the customer.
Answer: C The custodian, not the beneficial owner (minor), is the person who has the authority to make investment decisions for an account. Any tenant in a joint account may give instructions for the account.
Because a trust account is managed for the beneficial interest of the beneficiary, the investment adviser representative can: A) arrange to have the trust's funds pledged to support a loan for the trustee. B) place the securities in the trust fund in a noncustodial brokerage account. C) have a check drawn on the account payable to the trustee for expenses. D) have funds withdrawn from the account at the direction of the beneficiary.
Answer: C The trustee can be reimbursed for expenses that are reasonable. A trust account must be managed by the trustee and not by the beneficiary. Only the trustee can withdraw funds, provided the withdrawal is done in a manner consistent with the trust document. Trust funds must be placed in custodial or trust accounts, not in noncustodial accounts.
Under the Uniform Gift to Minors Act, all of the following are permissible EXCEPT: A) gifts of securities to a minor. B) the donor and the custodian are the same person. C) the purchase of securities on margin. D) gifts of cash to a minor.
Answer: C UGMA accounts may never be opened as margin accounts.
Your advisory client is an 86-year old woman who is presently in the hospital, unable to communicate due to a severe stroke. For the past 6 years, she has followed the practice of making annual gifts of stock to her children and grandchildren on her birthday. Since her 87th is coming up later this month, her oldest son approaches you and asks you to continue the policy. A) You should go to the hospital and see if she can blink her eyes to indicate yes or no. B) You may only follow the provisions of her will. C) Without a proper durable power of attorney being produced, you cannot do anything. D) With 6 years of prior history, you know this is what she would want you to do so you go ahead as in previous years.
Answer: C Unless proper written authorization has been provided, such as with a durable power of attorney, you cannot do anything without the client's consent. If she fails to recover and passes away, then the terms of the will must be followed by the executor.
Among the ways in which UGMA accounts differ from UTMA accounts is that: A) UGMA accounts transfer the assets of a deceased minor into the account of the custodian, while UTMA accounts retain the deceased minor's assets until the minor would have reached age 25. B) there is no difference between the accounts. C) the transfer of assets in a UTMA account can be deferred until the beneficial owner reaches as late as age 25; in a UGMA account, assets are transferred when the minor reaches the age of majority. D) gifts given under UGMA are irrevocable, while UTMA accounts allow the transfer of assets in and out of the account at the custodian's discretion.
Answer: C Unlike UGMA accounts where the assets are always transferred when the minor reaches the age of majority in that state, UTMA accounts may extend the transfer period first established by the Uniform Gift to Minors Act to as late as age 25. In neither case are the gifts revocable and, upon death of the minor, assets in either account go to the deceased's estate.
Several investors open an account in joint tenancy. Financial information is required on which of the following investors? A) Only the one authorized to trade the account. B) The majority of the investors. C) All of the investors. D) The largest investor only.
Answer: C When a joint account is opened, financial information should be obtained on all of the account owners.
If a customer who has granted a durable power of attorney to her son dies, which of the following statements regarding the power of attorney is TRUE? A) It remains in effect until the son cancels it. B) It remains in effect only if the son is the sole heir to the estate. C) It is canceled on the death of either principal. D) It remains in effect until the executor of the estate cancels it.
Answer: C When the customer or her son dies, the power of attorney also expires. However, a durable power of attorney will survive a declaration of mental incompetence and is useful in those cases where a parent suffers from dementia.
If an agent has been given limited power of attorney to exercise discretion in an account by the account holder, which of the following statements is TRUE? A) Each order must receive the prior approval of the branch office manager before it is entered. B) The power of attorney must be renewed annually by the account holder. C) The account holder is not permitted to enter new orders independently. D) A designated principal must frequently review the account.
Answer: D All discretionary accounts are subject to frequent review by a principal of the firm. Each order need not receive the prior approval of the branch office manager before it is entered. There is no requirement that the power of attorney be renewed annually by the account holder, although some firms make it their policy. The account holder is permitted to enter new orders independently.
You would not be able to open a margin account for a(n) A) discretionary account B) account owned by a corporate insider C) account held as tenants in common D) UTMA account
Answer: D Although no legal papers are required to open a custodial account, the account must be kept in accordance with state law under UTMA. This act prohibits securities in a custodial account from being bought on margin.
The term "discretionary" refers to an: A) account in which someone has been given custodial power over another individual's account. B) account in which a person has power of attorney over an incompetent individual's account. C) order that specifies size, security, or action but leaves the choice of time and price up to the agent. D) account in which the agent has the power to decide which securities to buy or sell without customer authorization for those specific trades.
Answer: D An order is discretionary when the broker/dealer's agent places it for a customer's account without the customer's express authorization for that order. Additionally, for the order to be considered discretionary, the agent must choose at least one of the following: the security, the number of shares (or dollar amount), or whether to buy or sell.
In order to pool their money for securities trading, two married sisters wish to open a single account with your firm. Which of the following would you recommend? A) A joint tenants with right of survivorship (JTWROS) account. B) A partnership account. C) Commingling is illegal. D) A tenants-in-common account.
Answer: D Because the sisters are married, it is most likely that, upon death, each would like their share to pass to their respective estates. Tenants-in-common provides that the deceased tenant's share passes to the estate and the remaining tenant is a co-tenant with the estate. Joint tenants with right of survivorship (JTWROS) provides that the entire account passes to the other tenant upon the death of one of the tenants.
One of your existing clients wishes to open a new account in the name of his spouse and enter orders on her behalf. A) the agent could be liable if the stock declines in value. B) this practice is ordinary and acceptable. C) this action is prohibited unless the customer signs a trading authorization on behalf of his spouse. D) this action is prohibited unless the spouse signs a trading authorization.
Answer: D Effecting transactions without specific written authority from the beneficial owner of the account is prohibited. This customer cannot sign trading authorization on behalf of his spouse. The spouse must sign the authorization.
Which of the following are required to execute orders in a customer's discretionary account? The customer must authorize each transaction in writing. Trades must be in accordance with the account holder's investment objectives. The rules relating to best execution are the same as for a nondiscretionary account. Discretionary orders must take place before nondiscretionary orders. A) I and II. B) I and IV. C) III and IV. D) II and III.
Answer: D If a customer provides discretionary authority in writing to an agent, written consent is not required for each transaction. Execution of discretionary orders, like all orders, is expected to be done at the best price available and to be in accordance with the customer's means and investment objectives.
An agent receives an order from a client to purchase $20,000 worth of stock in whatever company looks good. In what type of account could the agent accept this type of order? A) Custodial account managed by an administrator for the client's deceased cousin. B) Margin. C) Cash. D) Discretionary.
Answer: D If the agent has the ability to make the decision with respect to the specific security, even though the client specified the action (buy) and the quantity ($20,000), discretionary authorization is required.
In an account opened by two individuals as joint tenants with rights of survivorship, all of the following are true EXCEPT: A) orders may be entered by either party. B) mail may be directed to the joint owner agreed upon by both parties to the account. C) in the event of death, the other party assumes full ownership of the account. D) stock certificates may be delivered in the name of either party.
Answer: D In a JTWROS account, each party has an equal, undivided interest in the account. Upon the death of one party in a two-party account, the other party assumes full ownership of the account. Orders may be entered by either party, and mail may be directed to either party. However, disbursements of cash or securities must be in the name of all parties to the account.
In administering a joint account, a member firm's responsibilities concerning suitability determination and information disclosure apply to: A) the person with the greatest capital contribution. B) the person with trading authority for the account. C) the person whose Social Security number is on the account. D) all persons who jointly own the account.
Answer: D Suitability rules apply to all owners in a joint account.
If the Smiths want to open a joint account at AAA Securities Corporation and have their securities transferred to their three daughters upon the death of the last surviving account holder, their agent should recommend that the Smiths open: A) individual accounts in the name of each daughter. B) a tenants in common account. C) a joint tenancy account with right of survivorship. D) a joint tenancy account with right of survivorship and execute a transfer on death (TOD) registration form.
Answer: D The agent should recommend that the Smiths open a joint account with right of survivorship and complete a transfer of death registration form. The joint tenancy account gives the Smiths joint ownership in the securities in the account. The surviving joint tenant immediately becomes the owner of the whole property upon the death of the other joint tenant (right of survivorship). The transfer upon death registration identifies the beneficiaries to receive the securities upon the death of the last joint tenant. Only individual and JTWROS accounts may be opened with a TOD provision.
If three individuals have a tenants in common account with your firm and one individual dies, then A) the account must be liquidated and the proceeds split evenly between the two survivors and the decedent's estate B) trading is discontinued until the executor names a replacement for the deceased C) account is converted to joint tenants with rights of survivorship D) the two survivors continue as co-tenants with the decedent's estate
Answer: D The decedent's estate (via the executor or administrator) becomes a tenant in common with the survivors. Assets belonging to the deceased are ultimately disposed of as provided for in the will (or the state).
Which of the following is the beneficial owner of securities in an UTMA account? A) The custodian. B) The guardian. C) The donor. D) The minor.
Answer: D The minor is always the beneficial owner under an UTMA account. The custodian merely exercises his best judgment in handling investment decisions on the minor's behalf.
Who is obligated for the payment of taxes in an UTMA account? A) Custodian B) Donor C) Parent D) Child
Answer: D UTMA and UGMA accounts are custodial accounts. They are for the benefit of the child and bear the child's Social Security number. Although in practice the taxes are usually paid by the parent or legal guardian, they are the responsibility of the beneficial minor (child).
Under the Uniform Gifts to Minors Act, Ralph wants to give some stock to his brother's son, Jose. His nephew's father, Bob, is the legal guardian. If Ralph wants to name himself as custodian, which of the following needs to be done? A) Ralph must file the proper legal documents. B) Ralph must receive legal permission to act as custodian. C) Ralph must have the permission of the guardian. D) Ralph must open the account and name himself as the custodian.
Answer: D Under UTMA or UGMA, no special documentation is required. The account is opened in the name of the minor with the minor's Social Security number and the name of the adult listed as custodian.