In re Brace
Facts: A married couple purchases several residential properties, taking title as joint tenants. One spouse transfers their interest in the properties into a trust, naming the other spouse as the only beneficiary. Later, the spouse who created the trust files for Chapter 7 bankruptcy.
Claim: The bankruptcy estate seeks possession of the couple’s properties, claiming the transfer of interest was fraudulent since marital property is presumed to be community property and one spouse cannot separate out their interest in the properties.
Counter claim: The spouse claims the properties are not property of the bankruptcy estate, and the couple’s interests in the properties are separate since they took title to the properties as joint tenants.
Holding: A bankruptcy appellate panel holds the bankruptcy estate may take possession of the properties since they are presumed to be community property acquired during marriage, and thus one spouse cannot separate out their interest in the properties. [In re Brace (March 15, 2017) 566 BR 13]