Bankruptcy and assets of parents is usually never an issue. However, every now and then, we come across a case where the parent was too cheap to use an estate planning attorney and decided to put their life savings in the name of their child.
When a person files for bankruptcy and later finds out that their parent has put some asset in their name, the asset may end up getting seized by the bankruptcy court. For example, I recently spoke with a client from Cartersville Georgia whose chapter 7 bankruptcy case appeared to have zero problems. Unfortunately, we found out after the case was filed that his mother had put his name on her bank account (which contained her life savings) just in case something ever happened to her.
Adding your child as a joint owner of your bank account is always a bad idea. In the Cartersville case, the Chapter 7 bankruptcy trustee gets to step into the shoes of the child. As a result, the Chapter 7 bankruptcy trustee can take all of the mother’s money out of her bank account and use the money to pay for all of the debts owed in the child’s bankruptcy case.
Some people may argue, “Its not my money. I never put any money into that bank account. How can the bankruptcy trustee take it?” The answer is that when your mother put your name on her bank account, you became legally entitled to access all of the money in that account. The fact that you did not ever make any deposits and that you do not consider it to be money that belongs to you is not relevant. All that matters is that you have legal title to the money.
In this Cartersville case, the mother could have avoided the entire mess by going to an estate planning attorney to draw up a simple will leaving her assets to her child.
Potential car accidents are another reason you don’t want to put assets in the name of your child. If your child wrecks his car and kills someone, his car insurance my not cover all of the liability. Guess where the personal injury attorney is going to look for recovery of money? The answer is any asset that is in the name of your child.
You may save a few hundred dollars by not going to a Georgia estate planning attorney and just put everything in the name of your children. But in the end, you may lose everything as a result.