A TD account holds money on behalf of someone else
A TD account — the letters stand for "trustee" or sometimes "fiduciary" — is a checking or savings account opened in your name, but the money inside legally belongs to another person. You control the account and make deposits and withdrawals, but you are not the owner. You are holding the money in trust for a beneficiary: a minor child, an elderly parent, someone under a guardianship, or another person you are managing funds for.
Banks label these accounts differently. Some call them "in trust for" accounts, others use "as trustee for" or "FBO" (for the benefit of). The legal structure is the same: the account is registered to show that you are acting as a fiduciary, not as the owner.
The key difference from a regular joint account is that a joint account owner has full legal rights to the money. A TD account beneficiary does not — you do. But you cannot treat the money as your own. If you spend it on yourself, you are breaking the trust, and the beneficiary or their legal representative can hold you accountable.
Key Takeaways
- A TD account is opened in your name but holds money that legally belongs to someone else, and you manage it on their behalf.
- Banks require you to name the beneficiary on the account so the money passes to them automatically if you die, without going through probate.
- You can deposit and withdraw money, but you cannot spend it on yourself — the funds must be used only for the beneficiary's benefit.
- TD accounts are common for minors, elderly parents, and people under guardianship, but the rules and tax treatment depend on who the beneficiary is.
- If you die, the money in a TD account goes directly to the named beneficiary and does not become part of your estate.
Why people open TD accounts instead of joint accounts
A joint account gives both people equal legal ownership and equal access. That works fine if you and the other person are both adults and both want to use the account. But if you are managing money for a child, a parent with dementia, or someone under court guardianship, a joint account creates problems.
A minor cannot legally own a joint account with you — the bank will not allow it. An elderly parent with cognitive decline should not have equal control over their own money, because they might be vulnerable to scams or poor decisions. Someone under guardianship is legally prohibited from controlling their own funds. In all these cases, a TD account lets you manage the money without giving the beneficiary legal ownership or access rights.
TD accounts also have a probate advantage. When you die, money in a joint account can become tangled in your estate. Money in a TD account passes directly to the named beneficiary outside of probate, which means it reaches them faster and without court involvement.
How to set up a TD account at your bank
Walk into your bank or call and tell them you want to open an account "in trust for" or "as trustee for" someone. You will need to provide your own identification and Social Security number, and the beneficiary's full name and Social Security number or tax ID.
The bank will ask you to specify the relationship — parent, child, guardian, etc. — and may ask whether this is a formal guardianship or a personal arrangement. If it is a court-ordered guardianship, bring a copy of the guardianship papers. If it is informal (you are managing money for an aging parent who has not been declared incompetent), the bank will still open the account, but the rules about what you can do with the money depend on state law and the nature of the relationship.
You will sign the account agreement as the trustee. The beneficiary does not sign anything and does not need to be present. Once the account is open, you can deposit money and manage it as you see fit, but the account is registered to show that you are acting in a fiduciary capacity.
What you can and cannot do with money in a TD account
You can deposit money into the account and withdraw it to pay for the beneficiary's expenses. If you are managing money for a minor, that means school tuition, medical bills, food, clothing, and other direct costs of raising them. If you are managing money for an elderly parent, that means their rent, medications, care services, and living expenses. If you are a court-appointed guardian, the rules are stricter — you may need to keep receipts and file annual reports with the court showing how you spent the money.
You cannot withdraw money for your own use. You cannot pay yourself a fee or salary from the account without court permission (in a guardianship) or without clear agreement from the beneficiary (if they are an adult). You cannot invest the money in risky ventures or use it to cover your own debts. If you do, you have breached your fiduciary duty, and the beneficiary can sue you to recover the money.
The gray area is indirect benefit. If you buy groceries for a household where you and the beneficiary both live, can you charge part of the cost to the TD account? State law varies. Some states allow it if the expense directly benefits the beneficiary; others require strict separation. If you are unsure, ask the bank or a lawyer.
Tax treatment of TD accounts
Income earned in a TD account — interest, dividends — is taxed to the beneficiary, not to you, even though you control the account. If the beneficiary is a minor, the first $1,300 or so of annual income is usually tax-free (the standard deduction for dependents), and the next portion is taxed at the child's rate, which is often lower than yours. Above that, it may be taxed at your rate under "kiddie tax" rules.
You do not report the account on your own tax return. The bank will issue a 1099 form in the beneficiary's name and Social Security number. If the beneficiary is a minor, you (as their parent or guardian) will report the income on their tax return or file a separate return for them, depending on how much income there is.
If you are managing money for an adult beneficiary, the income is taxed to them at their rate. You will need to provide them with the 1099 or other tax documents so they can file their own return.
What happens to a TD account when you die
The money does not go to your estate or your heirs. It passes directly to the named beneficiary, outside of probate. This is one of the main reasons people use TD accounts — it is a simple way to make sure money reaches the person you intended without court delays or legal fees.
The beneficiary will need to contact the bank with a death certificate and proof of their identity to claim the money. The process is usually faster than probate, often taking a few weeks. If the beneficiary is a minor, their parent or legal guardian will claim it on their behalf and continue managing it until they turn 18 or 21, depending on state law and the account terms.
If you die without naming a beneficiary on the TD account, or if the beneficiary dies before you do, the money becomes part of your estate and goes through probate. This is why it is important to keep the beneficiary designation current and to review it if your circumstances change.
TD accounts for minors: UTMA and UGMA accounts
Many banks offer UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) accounts, which are a specific type of TD account for children. You open the account as custodian for the minor, and the money is held in trust until they reach the age of majority — usually 18 or 21, depending on your state and the type of account.
UTMA and UGMA accounts have tax advantages for minors and are commonly used by grandparents or other relatives to save for a child's future. The catch is that when the child reaches the age of majority, the money becomes theirs, and you lose control. You cannot tell them how to spend it. If you want to retain control longer or have different intentions for the money, a regular TD account or a formal trust may be better.
Frequently Asked Questions
Can the beneficiary access the money in a TD account?
Not unless you let them. A TD account is in your name, and you control it. The beneficiary has no legal right to withdraw money or even see the account balance. If the beneficiary is an adult and you want them to have access, you would open a joint account instead, or give them a debit card linked to the TD account.
What is the difference between a TD account and a joint account?
In a joint account, both people own the money equally and can access it independently. In a TD account, you own and control the account, and the beneficiary has no legal rights to it during your life. When you die, a joint account may go through probate, while a TD account passes directly to the beneficiary.
Do I need a lawyer to set up a TD account?
No. You can open a TD account at any bank without a lawyer. If you are a court-appointed guardian, the bank will ask for guardianship papers, but you do not need legal help to open the account. If you are managing a large amount of money or have complex family circumstances, a lawyer can advise you on whether a TD account or a formal trust is better.
Can I change the beneficiary on a TD account?
Yes, you can contact the bank and request a change. However, if the account is part of a court guardianship, you may need court permission. If the account is informal, you have the right to change it, but you should document the change in writing and keep records of how you spent the money while the previous beneficiary was named.
What happens if I die and the beneficiary is also deceased?
The money becomes part of your estate and is distributed according to your will or state law. This is why it is important to review your TD account beneficiary designations regularly and update them if circumstances change.