CFP Board Practice Exam Question 14

A client has been funding a custodial account for their child who has reached the age of majority. The client advised a CFP® professional to continue sending statements for the account to the client’s home as they do not want their child to know about the assets. Which of the following would be the most appropriate first action for the CFP® professional to take?

A. Change the registration of the account to remove the custodian and transfer assets to the child

B. Transfer the child’s account to another CFP® professional to avoid conflict of interest

C. Recommend that the custodial account be converted to an individual account in the child’s name and address

D. Liquidate the assets in the child’s account and send a check for the balance

Key: C

Rationale:

A. Incorrect. This would not be an appropriate action because the CFP® professional is changing the title without any consent.

B. Incorrect. Changing to another CFP® professional does not affect the requirement to get new account paperwork signed by the child.

C. Correct. The client should be reminded of their responsibilities related to the custodial account which includes the timely transfer of assets to the beneficiary. The CFP® professional cannot act independently to transfer the assets.

D. Incorrect. This would not be an appropriate action because the child may not want to liquidate securities. It may be a taxable event, and there is a requirement to inform the child.