Definition of 'Custodial Account'
1. An account created at a bank, brokerage firm or mutual fund company that is managed by an adult for a minor that is under the age of 18 to 21 (depending on state legislation).
2. A retirement account managed for eligible employees by a custodian.
Investopedia explains 'Custodial Account'
1. In a custodial account, approval from the custodian is required in order for a minor to transact securities. The custodian of these types of accounts is usually a parent or guardian of the minor.
2. The investments managed within a custodial account are limited to mutual funds and other similar products offered by regulated investment companies.