Picture this: you inherit a property from a relative, but they leave it to you with “bare legal title.”
You’re thrilled, at first, to inherit the property, but as time passes, you realize that holding bare legal title means you don’t have the right to use or enjoy the property. Yep, that’s right: You can’t live in it, rent it out, or even make changes to it without the permission of the person who has the right to use and enjoy it.
Bare legal title refers to the right to possess and control a property without having any rights to use or benefit from it. In most states, including Florida, the legal owner of bare legal title has the right to sell or transfer the property – but they don’t necessarily have the right to use or enjoy it.
However, when it comes to bankruptcy, holding bare legal title to an asset doesn’t always protect it from being sold by the bankruptcy trustee. It really just depends on the specific details of each case.
With that being said, there are situations in which holding bare legal title provides some protection for your assets.
For example, if you share property ownership with someone with the right to use and enjoy it, the bankruptcy trustee may be less likely to sell it since your interest is limited to the legal title only. Or, if you hold bare legal title to an asset subject to a valid lien or mortgage, then the trustee may be less likely to sell it because the proceeds would go toward satisfying the lien or mortgage.
But again, it’s important to remember that each case is unique, and holding bare legal title isn’t a guaranteed defense against the sale of your assets in bankruptcy.
Worried about what will happen to your assets after filing for bankruptcy? Here are some essential things to keep in mind if you hold bare legal title to an asset:
Resulting trusts can be confusing, but they’re essential to understand if you hold bare legal title to an asset.
A resulting trust arises when one person holds legal title to an asset, but another person is entitled to the beneficial interest in the asset. In other words, the person with bare legal title holds the asset in trust for the person with the right to use and enjoy it.
In cases involving bare legal title, a resulting trust may arise if evidence suggests that the person with bare legal title was not intended to be the true owner of the asset. A fairly common example would be when a parent puts a child’s name on the property title but continues to live in the property and pay all the bills. A resulting trust may arise in favor of the parent.
A trust can significantly affect how the asset is treated in bankruptcy. For example, if the asset is held in trust for someone else, it may not be considered property of the bankruptcy estate and may be protected from being sold by the bankruptcy trustee.
It’s also important to understand how bare legal title differs from other forms of property ownership, like joint tenancy or tenancy in common.
Here’s what you need to know:
An advantage of holding bare legal title is that it allows you to transfer legal ownership of an asset without giving up your right to receive income from it. This is particularly useful for estate planning or other situations where you want to pass ownership of an asset to someone else while retaining control over it.
However, holding bare legal title also means you don’t have the right to use or enjoy the asset – which can work against you if you want to live in a property or use it for another purpose.
Another issue? Holding bare legal title may not necessarily protect the asset from being sold in bankruptcy. Again, whether an asset is protected in bankruptcy depends on the specific facts of each case.
Protecting your assets during bankruptcy is crucial to preserving your financial future. Here are some ways you can do that during the bankruptcy process:
Whether you’re dealing with bare legal title or protecting your assets in bankruptcy, and there is no one-size-fits-all solution. That’s why consulting with a bankruptcy attorney is crucial to develop a strategy. They can help you understand your rights and options, navigate the process, and create a plan for rebuilding your financial future.
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