Would purchasing a Roth be an option?

[ameliabedilia]

I posted yesterday about my friends needing to file bk, but they are concerned because the wife has about $10k in her bank account that she is holding for her mother.

I have looked over a few older posts and it seems this could be a real problem for them. I don't think they should withdraw the money and start a new account add her mother now, right?

I started thinking about their situation and wondered if they could purchase a few roth ira's with the money since there is no penalty to withdraw the principal. What do you all think? I do not think they have a wildcard exemption, and besides that they are worried about getting sued and getting their accounts frozen and her mom losing all her money.

[newbie2]

My 2 cents? They need to call attorneys Monday and set up free consults before they do anything with that $10,000. That's not chump change, and one wrong move with it could mean a heap of trouble.

[chicagoannie]

Is there any kind of "paper trail" that they could use to prove the funds are entirely the mother's?

Also, if that money is in an account where either debtor has a delinquent credit obligation (or if they have ANY judgments against them) the money needs to be put elsewhere ASAP!

[ameliabedilia]

I agree- it's a decent size of money that needs to be figured out. They are also worried about getting a summons from a cc company, so they need to get it out no matter what. I will see what the deal is with the money and receipts/paper trail. I have no idea if they have any documentation. My feeling is probably not. That's why I was thinking about the roth. Any opinions on that? I believe they did talk to an attorney, and they shouldn't file just yet due to the lookback, but I could be wrong.

[catleg]

Our lawyer friend William from Las Vegas thought a Roth IRA was an excellent place to shelter money. Too bad the April 15 deadline has passed for last year.

[daylate]

I'm not sure what year it is set up for matters as much as when you did it. If you put 10k into a Roth right before filing I'm not sure it flies. I think I have read many threads on this subject and timing was always an issue. Also whether or not there was a pattern of contributions was a factor also. If you always did, it ws a lot more defensible. I agree with discussing this with an attorney asap before doing anything.

[ameliabedilia]

I have been reading that too. I wonder if they could do this, and then if/when they get a summons they answer it (I read that can buy some time?) and then they can wait a bit to file, at least 90 days or more. I think their case will be complicated because they have lots of little oddities like this. Luckily they are not thinking of going pro se (like my husband and I did), and will be consulting an attorney. Thanks everyone for the input and advice. I welcome any other ideas!

[GWBcasualty]

I'm not sure what year it is set up for matters as much as when you did it. If you put 10k into a Roth right before filing I'm not sure it flies. I think I have read many threads on this subject and timing was always an issue. Also whether or not there was a pattern of contributions was a factor also. If you always did, it ws a lot more defensible. I agree with discussing this with an attorney asap before doing anything.

Maybe?

But if you put $2.5k in your existing IRA account for 2010 and $2.5k in your existing IRA spouse account for 2010 and subsequently you do the same for 2011... I don't think any trustee can do anything about it. (Now of course 2010 is out of the question...)

In my book, that is just like getting new tires for your truck.

Now. If you NEVER had an IRA and you just open one a couple of months before filing putting $10k in it... I think that is different case law...