Formal trust account


A formal trust is an account that holds equity in trust for a minor, allowing you to ensure the financial well-being of your dependents. When minors reach the age of majority, they can open their own accounts and transfer the assets from their trust accounts to their new personal accounts.

What’s the difference between a formal and an informal trust account?

An informal trust is typically opened by an adult for the benefit of another person, usually a minor. Less legal documentation is required to open an informal trust than in a formal trust, but it may be treated differently under the law.

Like an informal trust, a formal trust is typically opened by an adult on behalf of a minor. However, there are additional formal (legal) documents required when opening the account. These extra documents ensure that any specific account instructions are legally binding.

What can be traded in this account?

Just about everything.

You can trade stocks (including OTC penny stocks), options (standard and mini-lots), ETFs, mutual funds, bonds, exempt market products, and physical gold in a margin account. There are also forex and CFD formal trust accounts.

How do I build my portfolio with dollar cost averaging?

DCA, or dollar cost averaging, is one strategy for building a formal trust that gives you tools for making regular contributions. DCA is typically associated with registered accounts, but it is also a classic approach for formal trusts. One way of using DCA is through a DRIP (dividend re-investment plan) program. For cash contributions, there are numerous funding methods, including PACCs (pre-authorized cash contribution) and automatic deposits.