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Terry L.
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Experience:  Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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How does trust asset protection affect bankruptcy exemptions? For

Resolved Question:

How does trust asset protection affect bankruptcy exemptions?

For example, many people are engaging in a asset protection strategy to transfer their homes into a trust.

They will quitclaim their home into a family trust where they are the trustees. Many attorneys around town are advertising this strategy. If these people need to file bankruptcy what homestead protection do they have? In Utah, each home owner gets a $30,000 homestead exemption, but what happens when the 2 homeowners become trustees of a trust and both homeowners file bankruptcy? Does the asset protection strategy backfire? Do they lose the personal homestead exemption?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 1 year ago.

Terry L. :

Hi, thanks for your question. You should hire a lawyer for specific legal advice. No attorney client relationship is created here.

Terry L. :

Generally, the courts will look to when they were transferred in relation to the bankruptcy filing, and also if they were revokable or not

Terry L. :

if they were revokable trusts, then the asset can be liquidated

Terry L. :

if they are irrevokable, then they may not be touched.

Terry L. :

Is this regarding the mom & son again?

Customer:

no, just a general question

Customer:

Are revokable trusts simply an alter ego of the homeowners? And therefore do the exemptions apply for homestead?

Terry L. :

yes, basically. since they can be revoked, the trustee can access them, since the debtor could revoke too

Terry L. :

They would get the exemption if they filed.

Terry L. :

if irrevokable, then they might lose the exemption, but the asset isn't theirs anymore, it is owned by the trust for the benefit of the beneficiaries

Customer:

an irrevocable trust is really a permanent transfer of title then, but I would assume it would have to be at least a year old to hold up

Terry L. :

correct, usually 2 years for bankruptcy though

Customer:

so let's suppose I am the beneficiary of an irrevocable trust and I file bankruptcy. do I get a homestead exemption for my beneficial interest in the irrevocable trust?

Terry L. :

if you live there, you might qualify for the exemption

Customer:

let's assume I live there yes

Terry L. :

your local attorney can review the facts to see if you would

Customer:

okay

Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2568
Experience: Better Business Bur 15yrs bankruptcy experience. Chicago Bar
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