For most Connecticut residents, estate planning and bankruptcy are two distinct sets of needs, with very little crossover between the two. That said, there are circumstances in which Chapter 7 bankruptcy can play a powerful role in the estate planning process. With proper planning, it is possible to pass down wealth from one generation to the next, without placing those assets at risk for loss.
Consider, for example, a case in which an adult child has gone through a period of severe financial turmoil. If that individual receives an inheritance, creditors have the right to pursue those assets to cover outstanding financial obligations. In some cases, that can mean the depletion of some or all of a person's inheritance.
If the individual were to complete the Chapter 7 bankruptcy process prior to inheriting assets, a great deal of unsecured debt could be eliminated through the discharge process. That would leave the heir able to make use of inherited wealth as he or she sees fit. As with so many financial matters, timing is everything when it comes to bankruptcy and estate planning.
For those in Connecticut who are interested in learning more, it may be time to schedule a consultation with an attorney. An inheritance is a monumental expression of love, and assets that pass from one family member to another are intended to improve the recipient's quality of life. Losing inherited wealth due to financial turmoil is never the intended outcome, and a properly timed Chapter 7 bankruptcy can eliminate that risk.
Source: pasadenajournal.com, "The Pitfalls of Joint Tenancy as an Estate Planning Tool", Marlene S. Cooper, Sept. 13, 2017