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Can We Setoff Against an UTMA Account?

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Sammy Smith, age eighteen, cashed a $3,000 cashier's check at our teller window last week. Today, as Security Officer, I learned that the check was fraudulent. Sammy has the proceeds of an insurance policy sitting in a UTMA account naming him as beneficiary (it was the reason, the teller told me, that the check was cashed for him).There is more than the amount of the bogus check in the UTMA account. Can we set off against the account to avoid having to take legal action against Sammy if he doesn't pay for the fraudulent check himself?

No, you can't. Whether or not your state would permit a setoff against a cashed check, setoff requires identical ownership. On the one side there is Sammy Smith, who owes your bank $3,000. On the other side, the UTMA account is not owned by Sammy Smith. It's held by the Custodian as custodial property for Sammy Smith. The funds in that account may ultimately be Sammy's, but he can't touch them yet, and neither can you.

First published on 10/11/10

First published on 10/11/2010

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Filed under security as: 

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