In 2009, our client, Todd H., transferred his home and some cash to one of our carefully drafted irrevocable trusts at a time when they were solvent and had no foreseeable liability problems. Todd’s wife was the trustee, and his wife and children were the beneficiaries. In 2010, Todd’s business went downhill along with the rest of the US economy. In 2011, Todd’s small business went bankrupt and he was also forced into personal bankruptcy. The transfer of the home to the trust was fully disclosed to the bankruptcy court, but the bankruptcy court excluded the trust and its assets pursuant to the federal bankruptcy code which provides that this type of trust is excluded from the bankruptcy estate. After losing everything else they owned in the bankruptcy, Todd’s family continues to live in the paid-off home that is owned by the trust.
