Estate PlanninG

How to Protect Your Remaining Assets After Bankruptcy

Bankruptcy is incredibly stressful, and it's no small decision to make. Once you have decided to file, though, you might be wondering what your next steps are. An estate plan can be your roadmap to a protected future as it can help you protect your remaining accounts and property as well as yourself and your loved ones.

Protecting Your Money and Property

Whichever chapter of bankruptcy you filed for, it's safe to assume you have less money and property now than you did before. However, during the bankruptcy process, certain accounts and pieces of property were protected under a federal or state exemption. These remaining assets still have value and need to be protected through a proper estate plan. This estate plan should include:

  • Beneficiary designations. For any accounts or policies you have retained after the bankruptcy (such as a life insurance policy or retirement account), it's vital that you correctly complete the beneficiary designations. If you fail to complete these forms, the money may be paid to your estate, necessitating the costly and time-consuming probate process, or it may go to individuals according to the order outlined in the governing agreement. In addition, going through probate may subject your retirement account to unintended income tax consequences.

  • Last will and testament. In your will, you name a personal representative or executor (the person who collects all of your accounts and property, pays your outstanding debts, and distributes the money and property to those you have named), specify who will receive your accounts and property at death, and name a guardian for any minor children. Using a will requires your loved ones to go through the probate process if you die owning accounts or property in your name alone without a beneficiary designation.

  • Revocable living trust. This is a type of trust created during your lifetime in which you name yourself as the current trustee and designate a co-trustee or successor trustee to serve if you become unable to act for any reason. During your lifetime, you change ownership of your accounts and property from yourself as an individual to yourself as the trustee or designate the trust as the beneficiary of your accounts and property. You retain the enjoyment of the property by also being named as the trust's beneficiary. The trust agreement outlines how the money and property will be used during your life, if you become incapacitated, and at your death. With this document, management of the trust's money and property occurs outside of the probate court. It is important to note that a revocable living trust does not provide you with any asset protection benefits. Caution: Before you change any accounts or property ownership, it's important that the bankruptcy proceeding be closed. Transferring funds or property during the proceeding could be seen as fraudulent or voidable.

What Other Protections Can an Estate Plan Provide?

While we usually associate estate planning with planning for death, we should also plan for what will happen if we become incapacitated (unable to make decisions for ourselves). If you don't choose the people you want in these roles (and outline these choices in a legal document), a judge will choose for you based on California law, and they may not be the choices you would have made.

Consider the answers to the following questions:

  • Who will make financial decisions for you if you are unable?

  • Who will make medical decisions for you if you are unable?

  • What are your wishes regarding end-of-life care?

  • What medical treatment do you want if you are diagnosed with a terminal illness or are in a persistent vegetative state?

  • Who will care for your minor children?

We understand that going through bankruptcy can be painful and incredibly overwhelming. But we want to help you get started in a new chapter on the right foot by creating a plan that protects your money and property.

Give us a call to discuss ways we can work together to customize an estate plan to meet your unique needs. Call Santaella Legal Group, serving San Ramon, Danville, Dublin, Pleasanton & the Tri-Valley area, at (925) 831-4840.