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Banking Law

Banking Funds Garnishment Ruling

bank iconGood news for our banking clients: We recently secured a favorable opinion when the Court of Appeals found that the placing of funds in a bank account as a trustee is not sufficient to establish a trust, nor protect the debtor’s money from garnishment.

Our client, a large financial institution, commenced collection proceedings upon an award of judgment in the Circuit Court. Garnishee Defendant, another large financial institution, disclosed that it was not indebted under the garnishment because the account maintained by the defendant at its institution was a “legal trust account only.”

In response to discovery, Garnishee Defendant produced redacted documents for bank accounts opened by defendant using her social security number. The documents indicated that the account under defendant’s name was eventually changed to defendant’s “trust” account. The Circuit Court granted our client’s motion, compelling payment of the funds held in the “trust” account. Garnishee Defendant filed a motion for relief and request for stay, all of which the Circuit Court denied.

On appeal, Garnishee Defendant claimed that the lower court erred by ordering disbursement of the funds because the judgment was obtained in the name of defendant, not her trust. Finding in favor of our client, the Court of Appeals determined that placing funds in a bank account as a trustee is insufficient to establish a trust, and affirmed that when the settlor of the trust is also the beneficiary, creditors can reach the assets of the trust.

By Randal Cole, Member, Dawda, Mann, Mulcahy & Sadler, PLC

Randal welcomes your calls or emails if you have any questions related to the case or garnishments in general. He can be reached at 248-642-3025, or rcole@dmms.com.