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Meaning / Definition of

Jumbo CD

Categories: Banking,

Jumbo CDs are large-denomination certificates of deposit with balances of at least $100,000, and sometimes $1 million or more. They tend to pay higher rates than smaller CDs and are purchased primarily by institutional investors. However, they're increasingly marketed to individual investors as low-risk, fixed-income assets. Jumbo CDs may be negotiable or non-negotiable. Negotiable CDs may be traded in the secondary market and are often issued in bearer form, which means that physical possession of the paper document is the sole proof of ownership. The banks that sell bearer CDs keep no records of ownership.Non-negotiable Jumbo CDs, like conventional CDs, remain on deposit in the bank that issued them and are held in the name of the purchaser. These Jumbo CDs, like other bank deposits, are FDIC insured, up to $100,000 per depositor in different categories of taxable accounts in each bank and up to $250,000 if they are held in self-directed retirement accounts, such as individual retirement accounts (IRAs).

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Definition / Meaning of

Custodial Account

Categories: Mutual Funds, Banking, Brokerages,

If you want to make investments on a minor's behalf, or transfer property you own to that person, you can open a custodial account with a bank, brokerage firm, mutual fund company, or insurance company.You name an adult custodian for the account - either yourself or someone else - who is responsible for managing the account until the child reaches the age of majority. That age may be 18, 21, or 25 depending on the state and the type of account you choose. At majority, the child has the legal right to control the account and use the assets as he or she chooses.There may be some tax advantages in transferring assets to a minor. If the child is under 18, investment earnings above a specific level that Congress sets each year are taxed at the parents' marginal tax rate. But if the child is 18 or older, all investment earnings are taxed at the child's rate - again, typically the lowest rate. In addition, gifts you make to the account are no longer part of your estate, which may reduce vulnerability to estate taxes. However, it's wise to review your plans with your legal and tax advisers.One drawback of a custodial account is that the assets are considered the property of the child, and may reduce the amount of financial aid the child qualifies for when he or she enrolls in a college or university.

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