What is Custodial Agreement Drafting?
A custodial agreement is a legal contract in which a custodian manages assets or property on behalf of a client, who owns them. You might require this contract when holding assets in a trust or storing goods for a business, for example.
Whatever the reason, if you need to draft a custodial agreement, you should consider the following tips.
Explore key terms to include in the agreement, how to draft it, and why hiring a lawyer for assistance with the agreement drafting process will benefit you.
What Information Should be in a Custodial Agreement?
A custodial agreement typically contains the following key terms:
- Custodian. Specify the financial institution that will hold the assets.
- Beneficiary. State the individual or company who is the legal owner of the assets.
- Assets or property. List the cash, financial instruments, and other assets being managed.
- Standard of care. Clearly define the custodian’s legal duties.
- Regulatory compliance. Make sure that the agreement reflects all relevant legal requirements.
- Termination. State how the agreement can end, such as by providing notice periods.
How Do You Draft a Custodial Agreement?
When drafting a custodial agreement, you must avoid vague language that can make operational duties or legal protections unclear, potentially creating disputes between parties. Here are some things to consider.
Include a Scope of Services
You want clarity about the assets being held and how they will be protected. Specify exactly how they will be stored. For example, funds should be kept separately from the custodian’s operational funds.
You should also specify physical storage conditions, such as regarding temperature control, video surveillance for security, and fire protection.
Explain Authorized Instructions
You want to outline exactly how the client will send the custodian instructions, such as in the form of written notices, for transferring funds, withdrawing them, or other requests. Explain what deadlines must be followed by the custodian when processing the client’s requests.
Provide Liability Clarity
It’s important to ensure both parties understand how much responsibility the custodian has. Outline what constitutes misconduct and gross negligence to protect the client’s interests.
Verify the Fee Structure
Outline the custody fees and any additional expenses that apply, such as the transaction and admin costs. State exact amounts that the client must pay the custodian, how the fees are calculated for transparency, and when payments will be due.
Outline Rights and Responsibilities
Both parties’ roles need to be specified. The custodian’s duties include safekeeping of assets, not using the assets, and notifying the client or owner of any risks involved. By comparison, the depositor or owner will provide detailed asset information and commit to paying fees on time.
Should You Hire a Lawyer for Custodial Agreement Drafting?
If you’re unsure of what to include in your custodial agreement or how to draft it with clarity, you should hire a lawyer to help you draft it. During a custodial agreement drafting, a qualified lawyer will:
- Define the custodian’s duties. For clarity, a lawyer will specify exactly what the custodian is responsible for, such as managing and protecting the assets.
- Set clear instructions and processes. A lawyer will help you determine how you can submit instructions to the custodian and what requests you can make.
- Clarify all fees and costs. They’ll prevent surprise financial obligations by establishing what fees apply and when they need to be paid to prevent additional charges.
- Protect your assets. A lawyer will add provisions to the agreement to secure the assets and clarify indemnity to protect your interests.
- Provide withdrawal rights. They’ll explain conditions under which clients are allowed to access, withdraw, or transfer their assets.
- Address termination processes. They’ll explain how the agreement can be terminated and what happens to the client’s assets at the end of the agreement, such as how they will be transferred.
- Align the agreement with legal requirements. They’ll verify that all agreement terms are compliant with applicable laws and requirements.
- Review your custodial agreement. If you’ve drafted the agreement, you can hire a lawyer to conduct a thorough review of it to give you peace of mind about all its terms.
Where to Hire a Lawyer for Custodial Agreement Drafting
Finding a lawyer to draft a professional custodial agreement shouldn’t be stressful or time consuming. Online legal platforms make finding and hiring a lawyer an easier process than having to call traditional law firms in your area.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a curated network of lawyers who have been vetted on the platform. The platform provides a range of lawyers you can work with, and you can review their profiles for information about their credentials and experience before hiring one.
When requesting that a lawyer on ContractsCounsel drafts your custodial agreement, here are the steps to follow.
- On your device, go to the ContractsCounsel marketplace.
- Choose ‘One-time project’ and ‘Create or update contract.’ For agreement reviews, select ‘Contract review’ instead.
- Post your project, which is free to do. Include some details of what you require to match with the most suitable and experienced lawyers for custodial agreement drafting.
- Wait to receive lawyer bids. You’ll receive multiple bids from lawyers directly on the platform who are ready to assist you.
- Review the lawyer data. The platform provides transparent information about lawyers for hire, including their location, field of expertise, years of experience, credentials, and client ratings for previous projects.
- Select a lawyer and hire them to draft your custodial agreement for a flat fee.
