Can Custodial accounts be garnished?
In most cases, yes.
Very few exemptions to wage garnishment exist, although laws can vary from state to state. Please refer to your own state’s law on this (or consult a legal professional).
What does ‘garnishment’ mean?
Garnishment is a way for creditors to take money from a person’s wages or bank account as a way of repaying debts owed to them. Creditors may only garnish accounts after obtaining a judgment. A judgment a decision in a lawsuit against a consumer about unpaid debt.
What types of income can’t be garnished?
Income that is considered “not subject to garnishment” and can’t be garnished at all has to be:
- Readily identifiable
- Submitted to a bank account via direct deposit
- Coming from an eligible source
Most income that can’t be garnished come from federal or state benefits. The Federal Trade Commission lists types of federal benefits that are exempt from garnishment.
Some of these include:
- Social Security benefits
- Supplemental Security Income (SSI)
- Student assistance
- Merchant seamen wages
- Compensation for injury, death, or detention of employees of U.S. contractors outside the U.S.
- Foreign service retirement and disability benefits
- Veterans’ benefits
- Civil service and federal retirement and disability benefits
- Military annuities and survivors’ benefits
- Railroad retirement benefits
Additionally, certain state benefits are not subject to garnishments, such as public assistance or unemployment payments from a state agency.
Payments from worker’s compensation or a public or private retirement plan are also not subject to garnishment. Your bank can provide you with an Affidavit about funds not subject to garnishment.
Unless money being deposited to a child’s Custodial Account comes from sources like these, the balance of the account will be subject to garnishment.
While you are the custodian, your name is on the account. Because your name is on the account, creditors or debt collectors can seek to garnish income that has been deposited there.
Parents have sometimes attempted to place funds into custodial accounts to avoid wage garnishment. This does not work.
Related questions View all Custodial
Q. Why Am I Still Receiving Statements?
We at Stash are legally required to send our clients statements for their account(s) in any month in which there was any activity or funds in the account. If you believe you should not have received a statement, log back into your account to see if your accounts are fully closed and… If you are fully closed with no funds in any of your account(s): Since your account is now fully closed and unfunded this would be your final statement.…
Q. Trying to Link your Stash with TD Bank?
As of April 25th, 2022, at 12:01a.m. ET, TD Bank implemented a change that requires all institutions, including Stash, to re-link once every 90 days if you linked your account via the Instant Link option using Plaid. What this means for Stash customers who are linked to a TD Bank account: This will not impact any deposits you make from your account,…
Q. Why did you sell part of my investments to cover my monthly subscription fee?
The way we initially attempt to charge the fee differs. We’ll try to pull from your Portfolio cash, linked debit/credit card, or Stash Banking1 balance first. If that doesn’t work, then we’ll sell a portion of your holdings in your Personal Invest Portfolio to cover the fee.…
Didn’t find your question?
Tell us what you’re looking for, and we’ll search for resources that could help.Ask your question
Fiduciary 101: Why it’s Our Job to be Your Advocate
It’s a big word that means a lot when it comes to handling your money. It defines a relationship built on trust and duty.
Debt and Equity: What Every Smart Investor Needs to Know
You can invest in debt & in equity, but do you really know what that means? We break down the jargon.