Can a custodial bank account be garnished?
In most cases, yes. Very few exemptions to wage garnishment exist, although laws can vary from state to state.
What happens to your bank account when you file Chapter 11?
Some banks, to preserve the assets for creditors, will freeze your account as soon as they receive notice of your bankruptcy. If the funds are yours—for instance, the money is post-filing income—you or your attorney should contact the bankruptcy trustee. The trustee will instruct the bank to lift the freeze.
Can the IRS take money from a custodial account?
When funds are transferred into a minor child’s custodial account at a financial institution or brokerage firm, the funds now irrevocably belong to that child. And you can’t take money from one kid’s custodial account and use it to open up or supplement an account for another kid.
Who pays taxes on custodial account?
What are the tax considerations for custodial accounts? Any investment income—such as dividends, interest, or earnings—generated by account assets is considered the child’s income and taxed at the child’s tax rate once the child reaches age 18.
Can you withdraw money from a custodial account?
While you can technically withdraw money from a custodial account before your child reaches the age of majority, you can only do so for the direct benefit of the child. Keep in mind that any funds you take out may also create taxable gains for your child, and that withdrawn money won’t have as much time to grow.
Do I need to report custodial accounts on taxes?
No, you have no reporting requirement as the custodian. The income from UTMA accounts is the named child’s income and is reported under his/her Social Security number. Your dependent child’s income from investments is taxable income and must be reported if it exceeds the filing threshold.
Who can withdraw money from a custodial account?
With 529 plans, you can only withdraw for eligible higher education expenses. In the case of Coverdell plans, withdrawals can only be made for the purposes of K-12 and higher education expenses. If you are the beneficiary of the custodial account, you can withdraw funds once you legally become an adult.