403(b)(7) Custodial Accounts - Who is the custodian?

[Guest brewbren]

Can anyone give me some insight into who may serve as custodian for a 403(B)(7) custodial account? Doesn't a bank typically serve as custodian? I'm dealing with a situation where an individual believes he is the custodian of the current mutual fund accounts. Is this permissible?

[Michael Devault]

Section 403(B)(7) refers to custodial accounts which satisfy the requirements of section 401(f)(2). This latter section refers to "custiodial accounts held by a bank or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will hold the assets will be consistent with the requirements of this section."

This typically includes banks, insurance companies, mutual fund companies, and some trust companies. I'll bet that your client, when opening his 403(B)(7) account, signed a custodial agreement which specifies that the fund company is the custodian of the account. (It's generally in the fine print... get out your magnifying glass!)

Hope this helps.