Can I transfer my house to my kids?

22 Mar Can I transfer my house to my kids?

Sometimes, even today, clients have a have a house worth a lot more than the mortgage – the house has equity. Yet they face massive debt. They want to save their home. In Illinois and in Wisconsin, the homestead exemption may not be enough to protect all of the equity, unlike Texas or Florida which have unlimited homestead exemptions.

So the clients ask, “Can I give the house to my children to protect myself from my creditors?” And I have to tell them that it’s not possible to do this. In fact, transfer of anything appreciable in value to any member of a family when you can’t pay your bills will be highly suspect. The bankruptcy trustee and other creditors will be able to claim that this is a “fraudulent transfer” or a “fraudulent conveyance” as it is sometimes called. And they will have the right to sue your child or other family member to whom you gave the property.

The time to think about protecting your assets is while you are able to pay your bills.

So the answer to this question is – yes, you can transfer your house to your kids. But you can’t if you have more debts than your assets. You can’t if you are left after the transfer with not enough assets to pay your debts. And you can’t if you are making the transfer with the intent to delay your creditors.

These sorts of fraudulent transfers can be undone for at least 2 years under the bankruptcy law and even for longer periods under state laws. For example, a trustee can look back 4 years for such transfers in Illinois and up to 6 years if you have unpaid federal income taxes.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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