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Account Protection from Subpoena and Garnishment
by Ken Golliher, BOL Guru
Guru BIOS
Question: Recently, CPAs and attorneys have been recommending that customers open accounts entitled "Wage Account" or "Wage and Compensation Account." I can only find this covered under Federal regs (not state). According to the customer, this will protect the funds on deposit from any subpoena, garnishment or levy, due to the fact that they are wages. Is this correct?
Answer: It is possible that the law of your state would protect wages from levy, probably up to certain amounts. I cannot be certain because you do not indicate what state you are from. However, if funds are sheltered, it is generally up to the individual to assert that protection at the time the levy is received. By asking you to put "extra" language in the account title, the customer is attempting to put the bank on notice so you will "know" the funds are protected. Clearly, if you turn over the funds, the customer will assert you are in the wrong because you were aware of the "defense." However, if you refuse, the court may point out that you have no standing to assert the customer's defense and find you liable for the amount of the levy regardless of whether you still have the money. If this is beginning to sound as if you just shot yourself in the foot, you understand.
In short, you as a banker should not allow customers to add verbiage to account titles or signature cards other than that which is supported by documentation or statute. If you do, you clearly indicate acceptance of some legal constraint, relying on the customer's legal advice, which is highly likely to be wrong.
Just say "No." If the customer refuses to open the account, in the fullness of time it may well be that running him/her off was your biggest accomplishment that day.
First published on BankersOnline.com 4/4/05
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