26 Feb Children’s Bank Accounts In Bankruptcy
Getting ready to file bankruptcy? Listed all your assets, have you? Worried about that bank account you are holding for your 8 year old child filled with money that came from your mom? I hope that bank account was opened the right way.
So what is the right way? You are allow to keep certain assets in bankruptcy. So the question is whether the account is really your child’s or yours. Well, if that account just has your name on it, then that’s the wrong way. It might still be a trust account for your kid, but now you have to go through all kinds of proof to document that the account was opened with that purpose in mind. Be prepared, no matter what the proof, you might not be able to satisfy the U.S. Trustee or the Bankruptcy Judge. Woe to you if you ever took any money out of that account to pay your bills. This is clear proof that you aren’t maintaining that account for the benefit of your child.
There is a law adopted by the states in one form or another that governs the proper way to set up a trust account for a minor. The Uniform Gift To Minors Act (UGTMA) keeps creditors at bay and keeps your kid’s money safe until they reach majority. A gift to a minor is irrevocable. This means you can’t take the money back out of the account. When a minor reaches majority, UGTMA accounts become the child’s property.
A proper UGTMA account is not property of your bankruptcy case. Check the National Conference of Commissioners on Uniform State Laws website for comments on the uniform version of the law that is applicable to your state.