Education Savings Accounts
By Kevin Gipson, New Orleans Bankruptcy Attorney on Feb 2, 2007 in General Bankruptcy Information
Education Savings Accounts (ESA) are a great way to save for the long term educational needs of your children, but can you keep the money in this account if you file for bankruptcy?
The answer is yes. Funds that are in ESA such as an education IRA are excluded from the bankruptcy estate so long as the debtor files a notice into the record of the bankruptcy case of his interest in the account.
But there are limitations.
Any or all of the following situations can result in the funds being included in the estate:
1) If the child (which includes stepchildren and grandchildren) was not a child of the debtor during the tax year that the funds were deposited into the ESA;
2) If the funds are excess contributions to an education IRA;
3) If the funds were deposited into the ESA within 365 days of filing bankruptcy;
4) If the funds were deposited into the ESA between 365 and 720 days, the exclusion is capped at $5,000.00 per beneficiary.
The notice requirement for an ESA is a trap for the unwary. The experienced consumer bankruptcy attorney can help you to avoid this and other mistakes that can cost you the unnecessary loss of your property.
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