Risk of Transferring Assets to Children
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This edition of the Koldin Report E-Newsletter reviews a recent Court case in Virginia that shows the risks of transferring assets to your children.
In 2002, a woman in Virginia transferred a portion of her life savings to her daughter for the specific purpose of protecting her assets in case she ever needed nursing home care. The daughter later filed for bankruptcy. The Bankruptcy Trustee demanded that the daughter turn over all her assets to pay off her creditors. The daughter argued that she should not have to turn over the funds she received from her mother because she was really just holding the funds for the benefit of her mother.
In a 2013 Decision, the U.S. Bankruptcy Court for the Eastern District of Virginia, in the case titled, In re Woodworth, ruled that the daughter clearly had complete ownership of the funds. According to the court, the mother could not have it both ways that she gave up ownership for purposes of Medicaid eligibility, but at the same time still owned it against her daughter’s creditors.
The Court held that the daughter must turn over all assets, including her mother’s life savings, to the Bankruptcy Trustee to pay the daughter’s creditors.
This case shows the risks of transferring assets to your children. A much better way to protect your assets is by transferring it to a specially designed irrevocable family trust. With a trust, you can protect your life savings without subjecting it to the problems of your children.
At the Koldin Law Center, P.C., located in East Syracuse, New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care. Our attorneys are available to discuss your estate planning options, including the advantages and disadvantages of Revocable Trusts and Irrevocable Trusts, along with other estate planning considerations including a Will, Power of Attorney, and Health Care Proxy. We do not charge a fee for the initial consultation. We welcome your children, family attorney, accountant, and/or financial planner to be present at the initial consultation.
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