Newsletter
Oregon Estate Planning
and Administration
Section Newsletter
Volume XXIV, No. 2
April 2007
Published by the
Estate Planning
and Administration
Section of the
Oregon State Bar
In This Issue
1 Bankruptcy and Estate Planning in Oregon
6 What’s New: Slusarenko, Cat Champion Corp.
8 2007 Section Officers
9 Legislative Review
Bankruptcy and Estate Planning in Oregon
As songwriters have long lamented, a person’s life savings can vanish
when misfortune strikes. Think of the gospel singer’s poor wayfaring
stranger, Woody Guthrie’s “Dust Bowl Blues,” or the Ray Charles hit, “I’m
Busted.” In the United States, debtors and their savings often part ways
in bankruptcy. Creditors can force a person into bankruptcy to collect
unpaid debts. Bankruptcy law can alter the state law protection of a debtor’s
assets. Bankruptcy trustees have extensive powers to gather and liquidate
debtors’ assets.
This article examines the collision of bankruptcy and estate planning. It
asks: when may assets held in trusts, estates, and retirement accounts survive
bankruptcy and remain available for their owners or the owners’ heirs? The
answer is that, with good planning, substantial assets may be preserved
in Oregon.1
Bankruptcy Law, Trusts and Estates
In bankruptcy, an asset of a debtor is available to creditors only if (1)
the asset is part of the bankruptcy estate, 11 USC § 541(c), and (2) it is not
exempt from the bankruptcy estate. The first section discusses property of
the estate and the second section discusses bankruptcy exemptions.
Property of the Estate
Interests of trust beneficiaries. Essentially any asset in which the debtor
has a legal or an equitable interest, including trust assets of which the debtor
is the beneficiary, can be reached by the debtor’s trustee in bankruptcy. 11
USC § 541(a)(1). Property of the estate, however, does not include a power
that the debtor can exercise only for the benefit of a third party, 11 USC §
541(b)(1), or equitable rights in property in which the debtor has only leg