Putting assets in a trust to protect assets from a BK two years from now?

[considering7]

I just went through a CH7 myself and I have a friend who is deeply in debt ($1million)with a business that doesn't seem to have a future. He's in his mid-60's and makes a good W2/1099 income ($200k/year) but he made an investment in a business a few years ago that hasn't panned out and he doesn't have the income to sustain the losses that this investment incurs each year. BK might be the only option for him if he wants to walk away and salvage whatever remaining assets he has left and live out his retirement securely.

In conversation I suggested he make sure he protect whatever unprotected assets he has now in the event that a BK becomes his only option down the road. He's got about $500k in Retirement accounts (SEP and 401k) which should be protected. He's got $350k in equity in his house (His state only allows $150k exemption) and he has $100k in cash.

I'm suggesting he pull out $200k in cash out of his house via a HELOC which would give him $300k in cash and allow him to keep the house. I then suggest he gifts most of that $300k in cash to his children. (When he's old and bedridden they can use it to pay for his care )

What about putting the house and or cash in a trust? I've heard of people doing that to protect their assets? Does anyone have any experience with a house with lots of equity in a trust? Can the BK trustee use it to pay back creditors?

Thanks in advance!

[despritfreya]

Let me be the first of what I presume will be many who respond.

If he follows your suggestions he and his children will end up in jail when they fail to turnover ALL of the money. FRAUD, FRAUD, FRAUD.

The best advice you could give to your friend is either none or tell him to meet with a well qualified bk attny.

Sorry to be so blunt but I see this type of "advice" cause many huge problems.

Des.

[kornellred]

It's pretty simple. Your friend has a lot of money. Your friend owes a lot of money. There is no such thing as keeping a lot of money and filing for bankruptcy. You cannot discharge a debt if you have the means to pay it.
Now - on the other hand - it is not illegal to refuse to pay debts. Your friend can simply stop paying. Then, get ready for lawsuits. And asset seizures. After all is said and done, your friend might have enough left to survive on for a while.
The best advice is for your friend to consult with a bankruptcy attorney and find out exactly the kind of sacrifice that will be required to retire the debts.

The forecast calls for pain. Unavoidable, no matter what your friend decides to do.

[newbie2]

Oh boy. I hope your friend talks to an attorney (or several) before taking your helpful advice.

Think of it this way: You file for bankruptcy and 2 years prior you had mucho bucks. You transferred those much bucks to other people (your family) to avoid giving any of it to people that are rightfully entitled to being paid. Don't you think a bankruptcy trustee isn't going to be a wee bit interested in those mucho bucks????

[frogger]

FRAUD, FRAUD, FRAUD.

Well said des.

FRAUD at its finest. You're in for a world of hurt if you proceed with this.

[Flamingo]

I just went through a CH7 myself and I have a friend who is deeply in debt ($1million)with a business that doesn't seem to have a future. He's in his mid-60's and makes a good W2/1099 income ($200k/year) but he made an investment in a business a few years ago that hasn't panned out and he doesn't have the income to sustain the losses that this investment incurs each year. BK might be the only option for him if he wants to walk away and salvage whatever remaining assets he has left and live out his retirement securely.

In conversation I suggested he make sure he protect whatever unprotected assets he has now in the event that a BK becomes his only option down the road. He's got about $500k in Retirement accounts (SEP and 401k) which should be protected. He's got $350k in equity in his house (His state only allows $150k exemption) and he has $100k in cash.

I'm suggesting he pull out $200k in cash out of his house via a HELOC which would give him $300k in cash and allow him to keep the house. I then suggest he gifts most of that $300k in cash to his children. (When he's old and bedridden they can use it to pay for his care )

What about putting the house and or cash in a trust? I've heard of people doing that to protect their assets? Does anyone have any experience with a house with lots of equity in a trust? Can the BK trustee use it to pay back creditors?

Thanks in advance!

When one runs a business and is in debt for $1 million, he needs the advice of a good business BK attorney. Estate advice at this point is moot because whatever he does money-wise right now will probably be investigated by the trustee. While it's nice to give friendly advice to friends, when there is a complicated situation regarding a possible business BK, it's best to consult directly with a business BK attorney.

[Pandora]

... BK might be the only option for him if he wants to walk away and salvage whatever remaining assets he has left and live out his retirement securely.

3 meals a day... cot... roommate.. all utilities paid for. His future and retirement is 100% secure....... in jail - if he listens to you vs. hiring a lawyer.

[chicagoed195]

Your "friend" needs advise and counsel from competent professionals, not from anonymous members of this forum. Trying to hide assets is never a good approach to any financial problem.