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Trust Amendment as Preference or FC
Thanks Pat.
I should have elaborated in my original post thatJeff's statement of the real property being held in debtor's self-settled trust for"many years"triggered my thought that the 10 yearSOL under section 548(e)(1) might obviate the need to address the effect of changing from revocable to irrevocable.
I stronglybelieve that if adebtor changed a self-settled trust from revocable to irrevocable prior tothepetition dateit would createa recoverable transferunder 548 because the debtor is transferring his present right to access the trust'sassets. It wouldn't be a 547preference because the debtor can't bea creditor of himself; I tried making an individual Chapter 11debtor an "insider" of himself shortly after BAPCPA went into effect and Judge Mund didn't like that approach of setting his monthlybudget for use of estate property.
Where a debtor named anyone other than himself as the trust beneficiaryutside the two year SOLfor548.
Respectfully,
Peter
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Boulevard, Suite 203, Culver City, California 90230-4647
Telephone: (310) 391-2400* Toll Free: (800) 307-3328 * Fax: (310) 391-2462
On Friday, January 10, 2014 11:34 AM, Patrick T. Green wrote:
Peter:
It is, but my point is that without 548(e)(1), the transfer to a self-settled trust is still a fraudulent transfer under 548(a)(1)(A) and could be brought back into the estate even if 548(e)(1) was not in the statute. Thus the net effect of 548(e)(1) is to extend the two year SOL of 546 to ten years.
I think there is problematic weakness in 548(e)(1). It requires a that the bennie of the trust be the debtor. It seems to me that 548(e)(1) could be avoided by making someone else the bennie, such as the settlorsnder 707(b)(3), but the intent of the statute to extend the SOL to ten years for these types of transfers could be defeated.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Peter M. Lively
Sent: Friday, January 10, 2014 10:01 AM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Trust Amendment as Preference or FC [2 Attachments]
Pat,
548(e) is directly onpoint, asit refers to transfers to a self-settled trust "within 10 years before the date of the filing of the petition" and sets for all of the required elements.
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Boulevard, Suite 203, Culver City, California 90230-4647
Telephone: (310) 391-2400* Toll Free: (800) 307-3328 * Fax: (310) 391-2462
On Friday, January 10, 2014 9:27 AM, Patrick T. Green wrote:
548(e)(1) merely extends the fraudulent transfer SOL in 548 from 2 years to 10 years for assets transferred to a self-settled trust. In the time frame Jeff is dealing with it is not needed.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Peter M. Lively
Sent: Wednesday, January 08, 2014 11:32 AM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Trust Amendment as Preference or FC [2 Attachments]
See 548(e)(1).
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Boulevard, Suite 203, Culver City, California 90230-4647
Telephone: (310) 391-2400* Toll Free: (800) 307-3328 * Fax: (310) 391-2462
On Tuesday, January 7, 2014 6:05 PM, Patrick T. Green wrote:
Jeff, et al.
Probate Code 15300-15309 govern a creditors (and the trustees) ability to access trust assets. While the settlor could properly amend the trust with a few sentences to make it irrevocable, it would be accessible under 15304 of the probate code. In addition, it would be a fraudulent transfer under both state law and the bankruptcy code.
Also for the bk code, in addition to the 727 problem, such a move reeks of bad faith under 707(b)(3).
The debtor might be better off outside bk where hindering and delaying are part of the game, but he has to be smarter than just making the trust irrevocable. The number one rule in asset protection outside of bk is the more barriers to collection, the greater the bargaining power.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Steven B. Lever
Sent: Tuesday, January 07, 2014 5:44 PM
To: cdcbaa@yahoogroups.com
Subject: RE: [cdcbaa] Trust Amendment as Preference or FC
Jeff:
Listen to your bones. Assets in an Revocable Living Trust remain with the Debtor as he/she is the settlor and beneficiary during the initial stages of the trust, and it turns irrevocable only on death or incapacity. If you make it an irrevocable trust it was transferred outside the bankruptcy estate, as it is the transfer "of an interest of the debtorIt probably already has a spendthrift clause, but that is inoperable during the revocable phase of the trust.
Moreover, I seriously doubt you can make a Revocable Living Trust an irrevocable one with just a few paragraphs of changes. These documents are constructed with provisions for dealing with the distribution of the unified credit for estate taxes, for example. An estate planning attorney would start with a new document and create a tax id and then start the transfers to the new trust.
The whole idea urged by others is crazy and unsound.Steve
Steven B. Lever
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of jsmith@cgsattys.com
Sent: Tuesday, January 07, 2014 5:38 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Trust Amendment as Preference or FC
I'm having a hard time conceptualizing an issue for further research. PC has the judgment creditor wolf at the door. Has real property in a revocable self-settled trust for many years prior to the financial problems at hand. He is being urged by others to amend the trust to make it non-revocable now.
I have already looked at 727 and believe that the act of adding a spendthrift and/or non-revocable language to the trust would jeopordize the debtor's discharge as an act to hinder, delay or defraud creditors in any subsequent BK.
But I also want to talk about whether the assets could be reached by the trustee if the debtor went into chapter 7 after making those amendments, hoping that no objection to discharge is started.
I am having a hard time finding direct law on the subject. Its not a preference, because nothing was "transferred". Or was it? Would you say the Debtor's rights as the beneficiary or the trustee to revoke the trust, if given away constitutes a "transfer of an interest of the debtor in property" per section 547(b)?
On the fraudulent transfer end there is the same argument. Section 548 uses the same words, the transfer "of an interest of the debtor" is recoverable if the elements are met.
Every bone in my body tells me the trustee can avoid the last minute amendment of the trust from revocable to non-revocable, and/or the amendment to add spendthrift terms, but I searched for an hour or two today and found nothing on point one way or the other.
Jeff Smith
The post was migrated from Yahoo.
Pat,
548(e) is directly onpoint, asit refers to transfers to a self-settled trust "within 10 years before the date of the filing of the petition" and sets for all of the required elements.
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Boulevard, Suite 203, Culver City, California 90230-4647
Telephone: (310) 391-2400* Toll Free: (800) 307-3328 * Fax: (310) 391-2462
On Friday, January 10, 2014 9:27 AM, Patrick T. Green wrote:
548(e)(1) merely extends the fraudulent transfer SOL in 548 from 2 years to 10 years for assets transferred to a self-settled trust. In the time frame Jeff is dealing with it is not needed.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Peter M. Lively
Sent: Wednesday, January 08, 2014 11:32 AM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Trust Amendment as Preference or FC [2 Attachments]
See 548(e)(1).
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Boulevard, Suite 203, Culver City, California 90230-4647
Telephone: (310) 391-2400* Toll Free: (800) 307-3328 * Fax: (310) 391-2462
On Tuesday, January 7, 2014 6:05 PM, Patrick T. Green wrote:
Jeff, et al.
Probate Code 15300-15309 govern a creditors (and the trustees) ability to access trust assets. While the settlor could properly amend the trust with a few sentences to make it irrevocable, it would be accessible under 15304 of the probate code. In addition, it would be a fraudulent transfer under both state law and the bankruptcy code.
Also for the bk code, in addition to the 727 problem, such a move reeks of bad faith under 707(b)(3).
The debtor might be better off outside bk where hindering and delaying are part of the game, but he has to be smarter than just making the trust irrevocable. The number one rule in asset protection outside of bk is the more barriers to collection, the greater the bargaining power.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Steven B. Lever
Sent: Tuesday, January 07, 2014 5:44 PM
To: cdcbaa@yahoogroups.com
Subject: RE: [cdcbaa] Trust Amendment as Preference or FC
Jeff:
Listen to your bones. Assets in an Revocable Living Trust remain with the Debtor as he/she is the settlor and beneficiary during the initial stages of the trust, and it turns irrevocable only on death or incapacity. If you make it an irrevocable trust it was transferred outside the bankruptcy estate, as it is the transfer "of an interest of the debtorIt probably already has a spendthrift clause, but that is inoperable during the revocable phase of the trust.
Moreover, I seriously doubt you can make a Revocable Living Trust an irrevocable one with just a few paragraphs of changes. These documents are constructed with provisions for dealing with the distribution of the unified credit for estate taxes, for example. An estate planning attorney would start with a new document and create a tax id and then start the transfers to the new trust.
The whole idea urged by others is crazy and unsound.Steve
Steven B. Lever
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of jsmith@cgsattys.com
Sent: Tuesday, January 07, 2014 5:38 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Trust Amendment as Preference or FC
I'm having a hard time conceptualizing an issue for further research. PC has the judgment creditor wolf at the door. Has real property in a revocable self-settled trust for many years prior to the financial problems at hand. He is being urged by others to amend the trust to make it non-revocable now.
I have already looked at 727 and believe that the act of adding a spendthrift and/or non-revocable language to the trust would jeopordize the debtor's discharge as an act to hinder, delay or defraud creditors in any subsequent BK.
But I also want to talk about whether the assets could be reached by the trustee if the debtor went into chapter 7 after making those amendments, hoping that no objection to discharge is started.
I am having a hard time finding direct law on the subject. Its not a preference, because nothing was "transferred". Or was it? Would you say the Debtor's rights as the beneficiary or the trustee to revoke the trust, if given away constitutes a "transfer of an interest of the debtor in property" per section 547(b)?
On the fraudulent transfer end there is the same argument. Section 548 uses the same words, the transfer "of an interest of the debtor" is recoverable if the elements are met.
Every bone in my body tells me the trustee can avoid the last minute amendment of the trust from revocable to non-revocable, and/or the amendment to add spendthrift terms, but I searched for an hour or two today and found nothing on point one way or the other.
Jeff Smith
The post was migrated from Yahoo.
See 548(e)(1).
Law Office of Peter M. Lively * Personal Financial Law Center I
11268 Washington Boulevard, Suite 203, Culver City, California 90230-4647
Telephone: (310) 391-2400* Toll Free: (800) 307-3328 * Fax: (310) 391-2462
On Tuesday, January 7, 2014 6:05 PM, Patrick T. Green wrote:
Jeff, et al.
Probate Code 15300-15309 govern a creditors (and the trustees) ability to access trust assets. While the settlor could properly amend the trust with a few sentences to make it irrevocable, it would be accessible under 15304 of the probate code. In addition, it would be a fraudulent transfer under both state law and the bankruptcy code.
Also for the bk code, in addition to the 727 problem, such a move reeks of bad faith under 707(b)(3).
The debtor might be better off outside bk where hindering and delaying are part of the game, but he has to be smarter than just making the trust irrevocable. The number one rule in asset protection outside of bk is the more barriers to collection, the greater the bargaining power.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Steven B. Lever
Sent: Tuesday, January 07, 2014 5:44 PM
To: cdcbaa@yahoogroups.com
Subject: RE: [cdcbaa] Trust Amendment as Preference or FC
Jeff:
Listen to your bones. Assets in an Revocable Living Trust remain with the Debtor as he/she is the settlor and beneficiary during the initial stages of the trust, and it turns irrevocable only on death or incapacity. If you make it an irrevocable trust it was transferred outside the bankruptcy estate, as it is the transfer "of an interest of the debtorIt probably already has a spendthrift clause, but that is inoperable during the revocable phase of the trust.
Moreover, I seriously doubt you can make a Revocable Living Trust an irrevocable one with just a few paragraphs of changes. These documents are constructed with provisions for dealing with the distribution of the unified credit for estate taxes, for example. An estate planning attorney would start with a new document and create a tax id and then start the transfers to the new trust.
The whole idea urged by others is crazy and unsound.Steve
Steven B. Lever
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of jsmith@cgsattys.com
Sent: Tuesday, January 07, 2014 5:38 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Trust Amendment as Preference or FC
I'm having a hard time conceptualizing an issue for further research. PC has the judgment creditor wolf at the door. Has real property in a revocable self-settled trust for many years prior to the financial problems at hand. He is being urged by others to amend the trust to make it non-revocable now.
I have already looked at 727 and believe that the act of adding a spendthrift and/or non-revocable language to the trust would jeopordize the debtor's discharge as an act to hinder, delay or defraud creditors in any subsequent BK.
But I also want to talk about whether the assets could be reached by the trustee if the debtor went into chapter 7 after making those amendments, hoping that no objection to discharge is started.
I am having a hard time finding direct law on the subject. Its not a preference, because nothing was "transferred". Or was it? Would you say the Debtor's rights as the beneficiary or the trustee to revoke the trust, if given away constitutes a "transfer of an interest of the debtor in property" per section 547(b)?
On the fraudulent transfer end there is the same argument. Section 548 uses the same words, the transfer "of an interest of the debtor" is recoverable if the elements are met.
Every bone in my body tells me the trustee can avoid the last minute amendment of the trust from revocable to non-revocable, and/or the amendment to add spendthrift terms, but I searched for an hour or two today and found nothing on point one way or the other.
Jeff Smith
The post was migrated from Yahoo.
charset="UTF-8"
Jeff, et al.
Probate Code 15300-15309 govern a creditors (and the trustees) ability to access trust assets. While the settlor could properly amend the trust with a few sentences to make it irrevocable, it would be accessible under 15304 of the probate code. In addition, it would be a fraudulent transfer under both state law and the bankruptcy code.
Also for the bk code, in addition to the 727 problem, such a move reeks of bad faith under 707(b)(3).
The debtor might be better off outside bk where hindering and delaying are part of the game, but he has to be smarter than just making the trust irrevocable. The number one rule in asset protection outside of bk is the more barriers to collection, the greater the bargaining power.
If you have any questions or concerns, please contact me.
Pat
Patrick T. Green
Attorney at Law
Fitzgerald & Green
1010 E. Union St. Ste. 206
Pasadena, CA 91106
Tel: 626-449-8433
Fax: 626-449-0565
pat@fitzgreenlaw.com
The post was migrated from Yahoo.
While a revocable trust is indistinguishable from its settlor/trustor while alive, an irrevocable trust is an entirely separate entity. It has its
own EIN number, etc. Section 548 would apply if the pc went and created an
irrevocable trust and conveyed his assets into it.
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)
In a message dated 1/7/2014 5:38:11 P.M. Pacific Standard Time,
jsmith@cgsattys.com writes:
I'm having a hard time conceptualizing an issue for further research. PC has the judgment creditor wolf at the door. Has real property in a revocable
self-settled trust for many years prior to the financial problems at hand.He is being urged by others to amend the trust to make it non-revocable
now.
I have already looked at 727 and believe that the act of adding a
spendthrift and/or non-revocable language to the trust would jeopordize thedebtor's discharge as an act to hinder, delay or defraud creditors in any subsequent BK.
But I also want to talk about whether the assets could be reached by the trustee if the debtor went into chapter 7 after making those amendments, hoping that no objection to discharge is started.
I am having a hard time finding direct law on the subject. Its not a
preference, because nothing was "transferred". Or was it? Would you say theDebtor's rights as the beneficia ry or the trustee to revoke the trust, if given away constitutes a "transfer of an interest of the debtor in property"
per section 547(b)?
On the fraudulent transfer end there is the same argument. Section 548 uses the same words, the transfer "of an interest of the debtor" is recoverableif the elements are met.
Every bone in my body tells me the trustee can avoid the last minute
amendment of the trust from revocable to non-revocable, and/or the amendment to
add spendthrift terms, but I searched for an hour or two today and found nothing on point one way or the other.
Jeff Smith
While a revocable trust is indistinguishable from its settlor/trustor while
alive, an irrevocable trust is an entirely separate entity. It has its own
EIN number, etc. Section 548 would apply if the pc went and created
an irrevocable trust and conveyed his assets into it.
Mark T.
JesseeLaw Offices of Mark T. Jessee"A Debt Relief Agency"50 W.Hillcrest Drive, Suite 200Thousand Oaks, CA 91360(805) 497-5868 (805)
497-5864 (Facsimile)
In a message dated 1/7/2014 5:38:11 P.M. Pacific Standard Time,
jsmith@cgsattys.com writes:
I'm having a hard time conceptualizing an issue for further research. PC
has the judgment creditor wolf at the door. Has real property in a revocable
self-settled trust for many years prior to the financial problems at hand. He
is being urged by others to amend the trust to make it non-revocable now.
I have already looked at 727 and believe that the act of adding a
spendthrift and/or non-revocable language to the trust would jeopordize the
debtor's discharge as an act to hinder, delay or defraud creditors in any subsequent BK.
But I also want to talk about whether the assets could be reached by the
trustee if the debtor went into chapter 7 after making those amendments, hoping that no objection to discharge is started.
I am having a hard time finding direct law on the subject. Its not a
preference, because nothing was "transferred". Or was it? Would you say the
Debtor's rights as the beneficia ry or the trustee to revoke the trust, if
given away constitutes a "transfer of an interest of the debtor in property"
per section 547(b)?
On the fraudulent transfer end there is the same argument. Section 548 uses
the same words, the transfer "of an interest of the debtor" is recoverable if
the elements are met.
Every bone in my body tells me the trustee can avoid the last minute
amendment of the trust from revocable to non-revocable, and/or the amendment
to add spendthrift terms, but I searched for an hour or two today and found
nothing on point one way or the other.
Jeff Smith
The post was migrated from Yahoo.