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Banking Interpretations

NYSBL 9-g

Subject: Set off against a minor's custodial account

Does a bank have the right to a set off against such an account if the lien is against the adult designated as the custodian?


Steven Barras/legal/NYSBD

To Sara Kelsey/legal/NYSBD@NYSBD

05/09/2005 09:42 AM

cc David.Billet@banking.state.ny.us

Subject Re: Fw: Set off against a minor's custodial account

With an apparent dearth of case law on the subject, my answer to the question is based my interpretation of the provisions of Section 9-g of the Banking Law, which relates to set-offs. That section only prohibits setoffs against accounts into which social security payments are directly deposited. Therefore, an analysis of the nature of a custodian account must be made to ascertain whether a setoff is legally appropriate. Although interest on a custodian account is taxed to the minor/beneficiary on the account (whose social security number appears on the account statement), the legal owner of the account is the adult who established the account. The adult has full access to the account and may deposit moneys at will and withdraw moneys for the benefit of the minor. Considering that the adult is the legal owner of the account, it would appear that setoffs would not contravene law. To opine otherwise could lead to a result where persons would have a good mechanism to hide money from creditors (there is no limit on the amount of funds that may be placed in custodian accounts - if the annual interest exceeds a certain amount, the minor would pay taxes on that amount).

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