Are Custodial accounts protected from creditors and garnishment?
Custodial accounts may be subject to garnishment from creditors looking to collect a debt owed. For creditors looking to collect on a debt owed by the custodian of the account, the Custodial account does not offer any special protection. As long as the account is under your name, it will be treated as if it belongs to you.
Once created, the parent relinquishes ownership of the assets, which become the property of the minor once they reach the age of majority.
How is this account protected by the FDIC?
In the event of a bank failure or takeover, custodial accounts are FDIC insured. This means that if anything happens to Stash, our custodian Apex, or the wider banking system, your custodial account is safe from creditors.
A custodial account is a kind of irrevocable trust. Because it is established by one party in the name of another party, it is treated like a trust account. This agreement is considered irrevocable and cannot be altered.
According to the FDIC, irrevocable trust accounts are generally insured for deposits up to $250,000, or more in some cases. This insurance is separate from other coverage provided for any other types of accounts held by the owner or beneficiary at the same bank.
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“Kids Portfolio” is a custodial UGMA / UTMA account. Money in a custodial account is the property of the minor. This type of account is a Non-Discretionary Managed account.
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