Applicability of Exemptions in Bankruptcy to Assets h=

[Yahoo Bot]

I guess I was assuming that the focus of548(e)(1) was to unwindan irrevocable
(self-settled) trust that the debtordesigned to prevent a trustee from being
able torevoke, since I understood that a trustee steps into the shoes of the
debtor to revoke any revokable trusts.
It is now apparent that the 548(e)(1)'s langauge regardingthe debtor's actual
intent tohinder, delay, or defaudcreditors in establishing thetrusteffectively extends prior existing548 provisions andUFTA recovery
limitations period to 10 years when debtors transfer assets to themselves in
this manner.
Not sure when debtor establishing anirrevocable trust with debtor asbeneficiary would ever make sense when any creditors exist or might exist in the
foreseeable future.Debtor would not be able to pre-bankruptcy plan to untangle
this ball of string...
Peter M. Lively, JD, MBA
The Personal Financial Law Center* Culver City & Costa Mesa * 800-307-DEBT
________________________________
To: cdcbaa@yahoogroups.com
Sent: Tue, May 17, 2011 6:44:43 PM
Subject: RE: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets heldin
Revocable Trusts
The easier terminology to apply is first and third party trusts. A first party
trust is one funded with the assets of the person named as beneficiary, aka as a
self settled trust. A third party trust is one that was funded with the assets
of someone other than the bennie. The typical revocable living trust that is
used in estate planning in CA is a self settled/first party trust as to thesettlor(s) (a term of art in CA law that is synonymous with trustors) during
their lifetimes and a third party trust as to their beneficiaries after they
die. This is the type of trust we most typically see with our consumer clients.
The problems occur when the debtors parents have inconveniently croaked before
the child/beneficiary has filed their bankruptcy or within 180 days after and
the trustee wants some or all of the distribution. Protecting the distributions
from this type of trust in bankruptcy is a terribly complex problem for someone
who does not have a solid background in trust law and practice. With the
appropriate knowledge of the case law, it is an interesting and fun area for
those of us who do, with all sorts of twists and turns and opportunities.
A trustees use of 548(e)(1) to go after a revocable living trust would be, as
Mark pointed out, an example of a trustee being out of their depth regarding
trust law (he gave two options, but I vote for the depth issue). It would also
be a big waste of time. The assets are as available as an account in the
debtors/settlors own name for the reasons that Mark pointed out, so why go to
trouble of using 548. The problem with the proper use of 548 is that it has a
major flaw in it. It is designed as a sort of extension of the fraudulent
transfer rules in that it gives the trustee 10 years to get the transfer back
instead of 2, 4 or 7, but it allows a settlor to transfer assets to an
irrevocable self settled trust for the benefit of someone other than the
settlor. 548(e)(1)(C). An exception one could drive a Mac truck through, as the
saying goes. Why the drafters put that it there, I cannot imagine, but being
out of their depth is probably the answer.
If you have any questions or concerns please contact me.
Pat
Patrick T. Green
Attorney at Law
1010 E. Union St. Suite 206
Pasadena, CA 91106
Tel: 626-44-8433
Fax: 626-449-0565
Email: pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Mark T.
Jessee
Sent: Tuesday, May 17, 2011 4:43 PM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets heldin
Revocable Trusts
Neither the bankruptcy code nor Californiacodes define the term "self-settled
trust". Blacks Law Dictionary defines it as, "A trust in which the settlor is
also the peron who is to receive the benefits from the trust, usu. set up in an
attempt to protect the trust assets from creditors." I have never interpreted
self-settled trusts to be narrowly limited toonly irrevocable trusts and
disclose transfers to revocable trusts in SOFA paragraph 10(b) with cross
reference to CA Probate Code Section 18200. While, I beleive the correct
interpretation of Section 548(e)(1) is that it was designed to thwart
irrevocable, so called asset protection trusts,SOFA 10(b) only asks about
transfers to self-settled trusts.Accordingly, I disclose andevaluatethe transfersin terms of Section 548(e)(1).As was brought up at the
CDCBAA seminar in February, at least some Chapter 7trusteesmaintain (be it
theyare incredibly agressive or are out of their depth relating to trust
law)thattransfers to revocable trusts fall under Section 548(e)(1). I do not
wantaccusations leveled at my client or mealleging failing to
discloserequired information when the trustee discovers the property is held in
trust.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868 (805) 497-5864 (Facsimile)
On Tue, 17 May 2011 15:27:24 -0700 (PDT), P L wrote:
>My questions went to the issue ofwhether a "selfsettled" trust isn'tdefined
>as an irrevocable trust which attempts to put assets outside of the reach of
>creditor and gives meaning to548(e)(1).
>
>Peter M. Lively, JD, MBA
>The Personal Financial Law Center* Culver City & Costa Mesa * 800-307-DEBT
>
>
>
________________________________
>From:Mark T. Jessee
>To: cdcbaa@yahoogroups.com
>Sent: Tue, May 17, 2011 1:52:01 PM
>Subject: Re: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets heldin
>Revocable Trusts
>If the debtor was nota beneficiary of at least some portion of the trust then
>548(e)(1)would not apply. Obviously if the debtorlacks anyremaining property
>interest, be it vested or contingentthere is nothing to exempt.>
>
>Exemptions may be asserted to protect assets of a revocable trust if the settlor
>has the right to revoke the trust in whole or part during the settlor's
>lifetime.Thenumber or relationship to the settlor>is irrelevant.
>
>
>The settlor/trustor is the person who initiatesthe trust's creation.>settled trust is a trust created at that person's initiation and that person is
>to receive benefits from the trust.Typical example. H & W establish revocable
>trust. It is for their benefit during theirlifetimes and provisions are made
>for distribution of assets at the first and/or second spouse's death.>Kidswould typically be the beneificiaries of the trust after the death of one
>or both parents. It is a self settled trust for H &W.>
>If this same trust were established as an irrevocable trust and had some sort of
>spendthrift clause to protect it from creditors it would also be a self settled
>trust for H & W becuase they have an interest in it during their
>lifetimes.That is exactly the type of trust Section 548(e)(1) is designed to
>thwart under the social policy that people should be responsible for
>theirdebts.
>
>If Grandma established an irrevocable trust for grandkids namingH & W trustees
>of the trust. This would not be a self settled trust for grandma because she is
>not a beneficiary presuming there is no contingency in which she could be a
>beneficiary of the trust.It is not a self settled trust for H & W, nor would
>it be a self settled trust for the grandkids.
>
>Mark T. Jessee
>Law Offices of Mark T. Jessee
>"A Debt Relief Agency"
>50 W. Hillcrest Drive, Suite 200
>Thousand Oaks, CA 91360
>(805) 497-5868 (805) 497-5864 (Facsimile)
>
>
>On Tue, 17 May 2011 13:09:20 -0700, Holly Roark wrote:
>
>>If they are not the sole beneficiaries, then they can't claim it as exempt?
>>
>>Holly Roark
>>On Tue, May 17, 2011 at 12:32 PM, Wesley H. Avery wrote:
>>
>>
>>
>>Subject to the limitation of Section 548(e)(1), I concur that the general rule
>>is that a homestead may be claimed by debtors through a revocable trust in which
>>they are the sole trustors and beneficiaries.
>>
>>Wesley H. Avery, Esq.
>>Roquemore, Pringle & Moore, Inc.
>>6055 E. Washington Blvd., Ste. 500
>>Los Angeles, CA 90040-2466
>>wavery@rpmlaw.com
>>http://www.rpmlaw.com/
>>(323) 724-3117 (office)
>>(323) 724-5410 (fax)
>>(323) 919-9336 (blackberry)
>>The Bankruptcy Law Center
>>28005 Smyth Drive, Ste. 125
>>Valencia, CA 91355-4023
>>wavery@thebankruptcylawcenter.com
>>http://www.thebankruptcylawcenter.com/
>>(661) 295-4673 (office)
>>(661) 430-5467 (fax)
>>(661) 618-7376 (cell)
>>Certified Specialist
>>Bankruptcy Law
>>State Bar of California
>>Board Certified
>>Business Bankruptcy Law
>>American Board of Certification
>>CONFIDENTIALITY NOTICE: The information contained in this e-mail transmission
>>is intended only for use of the individual or entity named above. This e-mail
>>transmission , and any documents, files, previous e-mail transmissions or other
>>information attached to it, may contain confidential information that is legally
>>privileged. If you are not the intended recipient of this e-mail transmission,
>>or the employee or agent responsible for delivering it to the intended
>>recipient, you are hereby notified that any disclosure, dissemination, copying,
>>or other use of this transmission or any of the information contained in or
>>attached to it is strictly prohibited. If you have received this e-mail
>>transmission in error, please immediately notify us by return e-mail
>>transmission or by telephone at (661) 618-7376, and destroy the original e-mail
>>transmission and its attachments without reading it or saving it in any manner.
>>Thank you.
>>
________________________________
>>From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Holly
>>Roark
>>Sent: Tuesday, May 17, 2011 12:15 PM
>>To: cdcbaa@yahoogroups.com; mjessee@jesseelaw.com
>>Subject: Re: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets held
>>in Revocable Trusts
>>
>>
>>Mark, I have searched the database for other discussion on this topic but have
>>not found any. Do most attorneys here agree that assets held in a revocable
>>trust can be exempted? Great analysis, by the way, Mark.
>>
>>Holly Roark
>>On Sun, Feb 20, 2011 at 10:55 PM, Mark Jessee wrote:
>>
>>Thanks to Larry & Jeremy for the time and effort in presenting the seminar
>>yesterday! It was a great refresher for me! One point raised really caused me
>>great concern however. Both Larry & Jeremy recommended any client holding assets
>>in a revocable trust reconvey the assets back to themselves as individuals
>>rather than continue to hold them as trustees of their revocable trust. The
>>rationale being that only individuals (natural persons) may assert exemptions
>>under Section 522(b). I am glad the issue arose as it is an important one we all
>>face, even when we are not aware of it when the clients fail to mention they
>>have a living trust. However, I respectfully disagree with Larry & Jeremy's
>>analysis on the applicability of exemptions to assets held in a revocable trust.
>>
>>I do not believe bankruptcy debtors are prohibited from exempting assets held in
>>their revocable trusts. As California opted out of the federal exemptions for
>>bankruptcy purposes, California exemption law applies. California law does not
>>treat assets held in a revocable trust any differently than those held in the
>>individuals name. A revocable trust is not really substantively a separate legal
>>entity from its settlor (the person who created it). Income is reported to the
>>settlor on his/her social security number. Trust assets are not protected from
>>the settlor's creditors either. "If the settlor retains the power to revoke the
>>trust in whole or in part, the trust property is subject to the claims of>>creditors of the settlor to the extent of the power of revocation during the
>>lifetime of the settlor." Probate Code 18200. The settlor is entitled to all
>>the exemptions an individual would have for his/her assets titled in just their
>>name. "Any settlor whose trust property is subject to the claims of creditors
>>pursuant to Section 18200 shall be entitled to all exemptions as provided in
>>Chapter 4 (commencing with Section 703.-10) of Division 2 of Titles 9 of Part 2
>>of the Code of Civil Procedure." This incorporates both the exemptions under
>>C.C.P. 703.140(b) and those starting with C.C.P. 704.010. Probate Code 18201
>>was enacted in 1998. Judge McManus recognized in two Eastern District cases
>>debtor's right to assert exemptions in bankruptcy cases for assets held in
>>revocable trusts. See In re Bogetti 349 B.R. 14, Bkrtcy.E.D.Cal., August 18,
>>2006 and In Re Barnes 275 B.R. 889, Bkrtcy.E.D.Cal., April 12, 2002. Even before
>>then there is case law recognizing the right of bankruptcy debtors to asset
>>exemptions in assets held in their revocable trusts. A homestead exemption was
>>allowed to the debtor who was trustee of his revocable trust by our own Judge
>>March in her decision in In Re Moffat 107 BR 255, Bkrtcy C.D., CA, 1989. Her
>>reasoning was that "Debtor's interest as a trustor and beneficiary under the
>>Living Trust, among other things, all became property of the bankruptcy estate
>>pursuant to 11 U.S.C. 541(a) upon the filing of debtor petition. Debtor is
>>entitled to claim an exemption in either of these legal interests.
>>Pursuant to debtor's interest as trustor in the "revocable" living trust, the
>>bankruptcy estate holds a "contingent reversionary interest" in the subject
>>dwelling. The bankruptcy trustee-standing in debtor's place as trustor of the
>>Living Trust-can, in his discretion, revoke the trust in whole or in part,
>>reverting title in the residence back to the bankruptcy estate. Debtor claims a
>>homestead in this "contingent reversionary interest" and the trustee has failed
>>to produce any legal authority for the proposition that a homestead cannot be
>>claimed in such an interest."
>>>
>>>If such assets are not exempt, we have exposed an area where our client's could
>>>face significant financial loss and a major malpractice trap. As an Estate
>>>planning attorney the concept that my estate planning clients, and every other
>>>estate planning attorney's clients, might not be able to assert exemptions in
>>>their assets if their financial condition later declines deeply disturbs me. If
>>>such assets cannot be exempted in a later bankruptcy it means that all CA estate
>>>planning attorneys face potential malpractice claims if they fail to advise
>>>clients of the risk of loss of assets' exemption protection if held in trust.
>>>Likewise, as a bankruptcy attorney, it concerns me that by advising clients to
>>>reconvey assets from their names as trustees of their revocable trusts to title
>>>them in just their own names leaves open exposing those assets to probate should
>>>the client die before the property is reconveyed to the trust after the>>>bankruptcy case is closed. This takes effort and usually money to an attorney.
>>>Additionally the failure to reconvey to the trust is fairly common even when
>>>just having transferred title back to settlor's/trustor's (person who created
>>>trust) name to refinance. If there is no pour-over will that names the trustee
>>>of the revocable trust the beneficiary, then the client's estate plan intent
>>>expressed in the trust is thwarted. Furthermore, one main reason such trusts are
>>>created is to avoid the expense and delay of the probate process. The probate
>>>process is based upon gross value, so even upside down homes require formal
>>>probate if held in just an individual's name. Even with the decline in real
>>>estate values, this can lead to $10,000 to $20,000 of extra fees that would not
>>>otherwise have been incurred if the assets remained in trust. This could>>>potentially be a malpractice pitfall for the bankruptcy attorney if the need to
>>>reconvey assets to the trust is not fully explained to the debtor clients.
>>>
>>>
>>>If my analysis is correct that assets held in a revocable trust may be exempted
>>>in bankruptcy, I submit that advising the debtor clients to reconvey out of the
>>>trust in the first place is unnecessary, causes the client to incur needless
>>>expense and potentially exposes the bankruptcy attorney so advising to potential
>>>malpractice liability if said property is not reconveyed back into the trust
>>>before the client dies.
>>>
>>>Accordingly, I think it is fraught with peril to advise potential debtors to
>>>reconvey assets out of their revocable trusts to themselves prepetition.>>>
>>>
>>>Mark Jessee
>>
>>
>>
>>--
>>Holly Roark
>>holly@roarklawoffices.com
>>www.roarklawoffices.com
>>Central District of California
>>Consumer Bankruptcy Attorney
>>1875 Century Park East, Suite 600
>>Los Angeles, CA 90067
>>T (310) 553-2600
>>F (310) 553-2601
>>I'm riding in AIDS/LifeCycle 10, a 545-mile bike ride from San Francisco to Los
>>Angeles,
>>
>>June 5-11, 2011, to raise money for the Jeffrey Goodman Clinic and other
>>services for
>>
>>people with AIDS.
>>You can make a donation online (or obtain a pledge form) at
>>http://www.tofighthiv.org/goto/hollyholly
>> __o
>> _`\> (_)/ (_)
>>SF * * * * * * * * * * * * * * * * * * * * * * 545 miles * * * * * * * * * * * *
>>* * * * * ** * * * LA
>>

The post was migrated from Yahoo.

[Yahoo Bot]

My questions went to the issue ofwhether a "selfsettled" trust isn'tas an irrevocable trust which attempts to put assets outside of the reach of
creditor and gives meaning to548(e)(1).
Peter M. Lively, JD, MBA
The Personal Financial Law Center* Culver City & Costa Mesa * 800-307-DEBT
________________________________
To: cdcbaa@yahoogroups.com
Sent: Tue, May 17, 2011 1:52:01 PM
Subject: Re: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets heldin
Revocable Trusts
If the debtor was nota beneficiary of at least some portion of the trust then
548(e)(1)would not apply. Obviously if the debtorlacks anyremaining property
interest, be it vested or contingentthere is nothing to exempt.
Exemptions may be asserted to protect assets of a revocable trust if the settlor
has the right to revoke the trust in whole or part during the settlor's
lifetime.Thenumber or relationship to the settlorof the trust beneficiaries
is irrelevant.
The settlor/trustor is the person who initiatesthe trust's creation. A self
settled trust is a trust created at that person's initiation and that person is
to receive benefits from the trust.Typical example. H & W establish revocable
trust. It is for their benefit during theirlifetimes and provisions are made
for distribution of assets at the first and/or second spouse's death.
Kidswould typically be the beneificiaries of the trust after the death of one
or both parents. It is a self settled trust for H &W.
If this same trust were established as an irrevocable trust and had some sort of
spendthrift clause to protect it from creditors it would also be a self settled
trust for H & W becuase they have an interest in it during their
lifetimes.That is exactly the type of trust Section 548(e)(1) is designed to
thwart under the social policy that people should be responsible for
theirdebts.
If Grandma established an irrevocable trust for grandkids namingH & W trustees
of the trust. This would not be a self settled trust for grandma because she is
not a beneficiary presuming there is no contingency in which she could be abeneficiary of the trust.It is not a self settled trust for H & W, nor would
it be a self settled trust for the grandkids.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868 (805) 497-5864 (Facsimile)
On Tue, 17 May 2011 13:09:20 -0700, Holly Roark wrote:
>If they are not the sole beneficiaries, then they can't claim it as exempt?
>
>Holly Roark
>
>
>On Tue, May 17, 2011 at 12:32 PM, Wesley H. Avery wrote:
>
>
>>Subject to the limitation of Section 548(e)(1), I concur that the general rule
>>is that a homestead may be claimed by debtors through a revocable trust in which
>>they are the sole trustors and beneficiaries.
>>
>>Wesley H. Avery, Esq.
>>Roquemore, Pringle & Moore, Inc.
>>6055 E. Washington Blvd., Ste. 500
>>wavery@rpmlaw.com
>>http://www.rpmlaw.com/
>>(323) 724-3117 (office)
>>(323) 724-5410 (fax)
>>(323) 919-9336 (blackberry)
>>Los Angeles, CA 90040-2466
>>The Bankruptcy Law Center
>>28005 Smyth Drive, Ste. 125
>>Valencia, CA 91355-4023
>>wavery@thebankruptcylawcenter.com
>>http://www.thebankruptcylawcenter.com/
>>(661) 295-4673 (office)
>>(661) 430-5467 (fax)
>>(661) 618-7376 (cell)
>>Certified Specialist
>>Bankruptcy Law
>>State Bar of California
>>Board Certified
>>Business Bankruptcy Law
>>American Board of Certification
>>CONFIDENTIALITY NOTICE: The information contained in this e-mail transmission
>>is intended only for use of the individual or entity named above. This e-mail
>>transmission , and any documents, files, previous e-mail transmissions or other
>>information attached to it, may contain confidential information that is legally
>>privileged. If you are not the intended recipient of this e-mail transmission,
>>or the employee or agent responsible for delivering it to the intended
>>recipient, you are hereby notified that any disclosure, dissemination, copying,
>>or other use of this transmission or any of the information contained in or
>>attached to it is strictly prohibited. If you have received this e-mail
>>transmission in error, please immediately notify us by return e-mail
>>transmission or by telephone at (661) 618-7376, and destroy the original e-mail
>>transmission and its attachments without reading it or saving it in any manner.
>>Thank you.
>>
________________________________
>>From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Holly
>>Roark
>>Sent: Tuesday, May 17, 2011 12:15 PM
>>To: cdcbaa@yahoogroups.com; mjessee@jesseelaw.com
>>Subject: Re: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets held
>>in Revocable Trusts
>>
>>
>>Mark, I have searched the database for other discussion on this topic but have
>>not found any. Do most attorneys here agree that assets held in a revocable
>>trust can be exempted? Great analysis, by the way, Mark.
>>
>>Holly Roark
>>On Sun, Feb 20, 2011 at 10:55 PM, Mark Jessee wrote:
>>
>>Thanks to Larry & Jeremy for the time and effort in presenting the seminar
>>yesterday! It was a great refresher for me! One point raised really caused me
>>great concern however. Both Larry & Jeremy recommended any client holding assets
>>in a revocable trust reconvey the assets back to themselves as individuals
>>rather than continue to hold them as trustees of their revocable trust. The
>>rationale being that only individuals (natural persons) may assert exemptions
>>under Section 522(b). I am glad the issue arose as it is an important one we all
>>face, even when we are not aware of it when the clients fail to mention they
>>have a living trust. However, I respectfully disagree with Larry & Jeremy's
>>analysis on the applicability of exemptions to assets held in a revocable trust.
>>
>>I do not believe bankruptcy debtors are prohibited from exempting assets held in
>>their revocable trusts. As California opted out of the federal exemptions for
>>bankruptcy purposes, California exemption law applies. California law does not
>>treat assets held in a revocable trust any differently than those held in the
>>individuals name. A revocable trust is not really substantively a separate legal
>>entity from its settlor (the person who created it). Income is reported to the
>>settlor on his/her social security number. Trust assets are not protected from
>>the settlor's creditors either. "If the settlor retains the power to revoke the
>>trust in whole or in part, the trust property is subject to the claims of>>creditors of the settlor to the extent of the power of revocation during the
>>lifetime of the settlor." Probate Code 18200. The settlor is entitled to all
>>the exemptions an individual would have for his/her assets titled in just their
>>name. "Any settlor whose trust property is subject to the claims of creditors
>>pursuant to Section 18200 shall be entitled to all exemptions as provided in
>>Chapter 4 (commencing with Section 703.-10) of Division 2 of Titles 9 of Part 2
>>of the Code of Civil Procedure." This incorporates both the exemptions under
>>C.C.P. 703.140(b) and those starting with C.C.P. 704.010. Probate Code 18201
>>was enacted in 1998. Judge McManus recognized in two Eastern District cases
>>debtor's right to assert exemptions in bankruptcy cases for assets held in
>>revocable trusts. See In re Bogetti 349 B.R. 14, Bkrtcy.E.D.Cal., August 18,
>>2006 and In Re Barnes 275 B.R. 889, Bkrtcy.E.D.Cal., April 12, 2002. Even before
>>then there is case law recognizing the right of bankruptcy debtors to asset
>>exemptions in assets held in their revocable trusts. A homestead exemption was
>>allowed to the debtor who was trustee of his revocable trust by our own Judge
>>March in her decision in In Re Moffat 107 BR 255, Bkrtcy C.D., CA, 1989. Her
>>reasoning was that "Debtor's interest as a trustor and beneficiary under the
>>Living Trust, among other things, all became property of the bankruptcy estate
>>pursuant to 11 U.S.C. 541(a) upon the filing of debtor petition. Debtor is
>>entitled to claim an exemption in either of these legal interests.
>>Pursuant to debtor's interest as trustor in the "revocable" living trust, the
>>bankruptcy estate holds a "contingent reversionary interest" in the subject
>>dwelling. The bankruptcy trustee-standing in debtor's place as trustor of the
>>Living Trust-can, in his discretion, revoke the trust in whole or in part,
>>reverting title in the residence back to the bankruptcy estate. Debtor claims a
>>homestead in this "contingent reversionary interest" and the trustee has failed
>>to produce any legal authority for the proposition that a homestead cannot be
>>claimed in such an interest."
>>>
>>>If such assets are not exempt, we have exposed an area where our client's could
>>>face significant financial loss and a major malpractice trap. As an Estate
>>>planning attorney the concept that my estate planning clients, and every other
>>>estate planning attorney's clients, might not be able to assert exemptions in
>>>their assets if their financial condition later declines deeply disturbs me. If
>>>such assets cannot be exempted in a later bankruptcy it means that all CA estate
>>>planning attorneys face potential malpractice claims if they fail to advise
>>>clients of the risk of loss of assets' exemption protection if held in trust.
>>>Likewise, as a bankruptcy attorney, it concerns me that by advising clients to
>>>reconvey assets from their names as trustees of their revocable trusts to title
>>>them in just their own names leaves open exposing those assets to probate should
>>>the client die before the property is reconveyed to the trust after the>>>bankruptcy case is closed. This takes effort and usually money to an attorney.
>>>Additionally the failure to reconvey to the trust is fairly common even when
>>>just having transferred title back to settlor's/trustor's (person who created
>>>trust) name to refinance. If there is no pour-over will that names the trustee
>>>of the revocable trust the beneficiary, then the client's estate plan intent
>>>expressed in the trust is thwarted. Furthermore, one main reason such trusts are
>>>created is to avoid the expense and delay of the probate process. The probate
>>>process is based upon gross value, so even upside down homes require formal
>>>probate if held in just an individual's name. Even with the decline in real
>>>estate values, this can lead to $10,000 to $20,000 of extra fees that would not
>>>otherwise have been incurred if the assets remained in trust. This could>>>potentially be a malpractice pitfall for the bankruptcy attorney if the need to
>>>reconvey assets to the trust is not fully explained to the debtor clients.
>>>
>>>
>>>If my analysis is correct that assets held in a revocable trust may be exempted
>>>in bankruptcy, I submit that advising the debtor clients to reconvey out of the
>>>trust in the first place is unnecessary, causes the client to incur needless
>>>expense and potentially exposes the bankruptcy attorney so advising to potential
>>>malpractice liability if said property is not reconveyed back into the trust
>>>before the client dies.
>>>
>>>Accordingly, I think it is fraught with peril to advise potential debtors to
>>>reconvey assets out of their revocable trusts to themselves prepetition.>>>
>>>
>>>Mark Jessee
>>
>>
>>
>>--
>>Holly Roark
>>holly@roarklawoffices.com
>>www.roarklawoffices.com
>>Central District of California
>>Consumer Bankruptcy Attorney
>>1875 Century Park East, Suite 600
>>T (310) 553-2600
>>F (310) 553-2601
>>I'm riding in AIDS/LifeCycle 10, a 545-mile bike ride from San Francisco to Los
>>Angeles,
>>
>>June 5-11, 2011, to raise money for the Jeffrey Goodman Clinic and other
>>services for
>>
>>people with AIDS.
>>You can make a donation online (or obtain a pledge form) at
>>http://www.tofighthiv.org/goto/hollyholly
>> __o
>> _`\> (_)/ (_)
>>SF * * * * * * * * * * * * * * * * * * * * * * 545 miles * * * * * * * * * * * *
>>* * * * * ** * * * LA
>>

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[Yahoo Bot]

Doesa"self-settled trust" include a recovable trust?
Peter M. Lively, JD, MBA
The Personal Financial Law Center* Culver City & Costa Mesa * 800-307-DEBT
________________________________
To: cdcbaa@yahoogroups.com; mjessee@jesseelaw.com
Sent: Tue, May 17, 2011 12:32:50 PM
Subject: RE: [cdcbaa] Applicability of Exemptions in Bankruptcy to Assets held
in Revocable Trusts
Subject to the limitation of Section 548(e)(1), I concur that the general rule
is that a homestead may be claimed by debtors through a revocable trust in which
they are the sole trustors and beneficiaries.
Wesley H. Avery, Esq.
Roquemore, Pringle & Moore, Inc.
6055 E. Washington Blvd., Ste. 500
wavery@rpmlaw.com
http://www.rpmlaw.com
(323) 724-3117 (office)
(323) 724-5410 (fax)
(323) 919-9336 (blackberry)
Los Angeles, CA 90040-2466
The Bankruptcy Law Center
28005 Smyth Drive, Ste. 125
Valencia , CA 91355-4023
wavery@thebankruptcylawcenter.com
http://www.thebankruptcylawcenter.com
(661) 295-4673 (office)
(661) 430-5467 (fax)
(661) 618-7376 (cell)
Certified Specialist
Bankruptcy Law
State Bar of California
Board Certified
Business Bankruptcy Law
American Board of Certification
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is intended only for use of the individual or entity named above. This e-mail
transmission , and any documents, files, previous e-mail transmissions or other
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Thank you.
________________________________

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