What’s the difference between a standard, an informal and a formal trust account?
All of these account types are classified as margin accounts; investments can be made in stocks, options, gold, ETFs, mutual funds, bonds, GICs, forex and CFDs. The difference lies in ownership and legal documentation.
- A standard account is opened, typically, by an individual who trades on his or her own behalf.
- An informal trust is typically opened by an adult for the benefit of another person, usually a minor. Compared to a formal trust, there is less legal documentation required to open an informal trust, however, 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. There are additional formal (legal) documents required when opening the account. These extra documents ensure that any specific account instructions are legally binding.
Can there be multiple holders on an informal trust account?
Yes. If you want to open an informal trust account with two or more holders, open a joint informal trust. It works just the same as a standard informal trust account, the only difference is having multiple traders in the account.
Is a trust agreement required for an informal trust?
No. Informal trusts do not require a trust agreement.
This is an easy one: you can trade just about everything.
In an informal trust equities margin account, trade stocks (including OTC penny stocks), options (standard and mini), ETFs, mutual funds, bonds, term deposits, GICs and precious metals.
And in an FX and CFD account, trade foreign exchange and contracts for difference.
It’s your money. Keep it that way.
Seriously. Keep your money. We keep costs low with the best stock trade commissions in Canada, commission-free purchases of any North American ETF, and commission-free bonds trading. There are no commissions on FX and CFD trades.
One strategy for building an informal trust is contributing to it regularly. DCC, or dollar cost averaging, is more typically associated with registered accounts, but the principle matches this type of account perfectly: regular contributions will help offset market fluctuations in the long term. We offer PACCs (pre-authorized cash contribution), automatic deposits, and a free dividend re-investment plan (DRIPs are only available in equities accounts).