On the foreign financial account what is the difference between a deposit and custodial account?

[SusanY1]

Most standard bank accounts will be deposit accounts.  A custodial account is an arrangement to hold certain types of deposits (typically not cash)

[pk]

@ashabhagchandani , a deposit account is generally a bank account that you own yourself or jointly with someone else. The general assumption is that the owner is not a minor.  A custodial account is one that you or someone operates for another living person or for an entity -- like a trustee account.

In case of FBAR or FATCA reporting what they are trying to get to is the assets  that you control either through ownership or as trustee or have only signature authority ( but no financial interest -- like being on an account as a signatory with your parents / family member but they actual own and operate the account.

Does this help ?

Namaste ji

pk

[pk]

@SusanY1 , I would like to point out that "petty cash " account for entities is really a custodial account  i.e. the person is acting as a trustee for the entity.  For FBAR and FATCA purposes it is more like a trust account operated  for and and on behalf of a person that legally may not or cannot  -- such as a child or ad debilitated / incapacitated loved one.  No ??

[maggieandsteve]

Searching for "custodial account" on the IRS website brings up instructions for three types of custodial accounts; retirement savings custodial accounts, education savings custodial accounts, and health savings custodial accounts.  So I guess all of these could be custodial accounts.  The custodian is typically a bank or brokerage.

[DaveF1006]

According to this Turbo Tax link "Custodial accounts are those that the bank is holding for the person and depository accounts are those that the bank must be responsible for (savings and checking accounts." 

[Ethan2022]

Hello,

Turbotax doesn't have the option for a foreign brokerage account, in which I can trade stocks, as a foreign financial account. There is only Doposit or Custodial, and no third choice.

So how can I select for it?

Thanks.

[DaveF1006]

There is no third choice. An investment account is a custodial account for IRS 8938 reporting purposes. You will enter more details in line 29 on the 8938 if this is a stock account but elsewhere if it is another type of investment account.

Please read the instructions for 8938 for more information.

@Ethan2022 

[pk]

@Ethan2022 , agreeing with @DaveF1006 , I am still at a loss to understand what you are trying to achieve --- understand that you a US person ( citizen/GreenCard/ Resident for tax purposes ) have a foreign brokerage account ( which country ? )  and through which  you may be investing in local  stocks ( i.e. stocks  traded / listed only on a foreign exchange).  Are you trying to meet FATCA requirements  or FBAR requirements or what ?  I ask because  while @DaveF1006 's answer covers  the question/ comment, I am not sure  whether this covers  what you are trying to do --yes ?   Please answer  and one of us will come back and help.

[user61673]

"...or have only signature authority ( but no financial interest -- like being on an account as a signatory with your parents / family member but they actual own and operate the account."

This is exactly my situation. So what do I put in? Custodial or deposit? It's a normal bank account that I have signature authority over. 

Thanks in advance!

[SusanY1]

If you could go into the bank and transact business, you are generally considered to have financial interest.  The "no financial interest" most commonly applies to corporate or company bank accounts where there is no ownership, but depending on the rules at the bank where the account is set up, it could apply in your case as well. 

A normal bank account will be a deposit account. 

[pk]

@user61673 , while generally agreeing with my colleague @SusanY1 , would just like to point out that 

(a) most bank accounts are "deposit" accounts because these are accounts wherein you can deposit/ withdraw monies, whether these are checking o savings in nature.

(b) a custodial account however is one in which you are holding monies for another  such as when a brokerage sells your stocks for you and holds the proceeds in a custodial account i.e.. an account held for a specific purpose such as for re-investment or distribution to the owner.  Another use of custodial account  is when a custodian holds and operates the account of a minor ( i.e. for the benefit of the minor whom cannot operate the account.

For purposes of form 8939 ( FATCA) , monies held in deposit  and/or custodial accounts are all  aggregated  for reporting threshold.

Does this answer your query?  If so please accept the answer ( so the thread gets closed) .  Or tell me what more I can do for you to earn that --yes?

pk