Nevada natives are likely familiar with Frank Sinatra’s casino at Lake Tahoe. Built in 1926, the Cal Neva was purchased by Frank Sinatra in 1960. Though it has seen many different owners since that time, the Cal Neva is still known as Frank Sinatra’s casino. The landmark was closed in 2013 for renovations for nearly three years. Unfortunately, the casino is now in bankruptcy.
The unfortunate state of Cal Neva
The renovations at this Lake Tahoe casino were never completed. Several months after ceasing the repairs, the Cal Neva Resort & Casino filed Chapter 11 bankruptcy. As a result, it is not certain when the property will be able to reopen. According to the court filings, the famous casino has approximately $40 million in debt, in addition to the more than $23 million required to finish the renovation. The financial issues became dire in February when the developer defaulted on a $6 million loan. At that point, the lender intended to initiate foreclosure proceedings, forcing the developer to file the Chapter 11 case in order to halt foreclosure.
The Cal Neva under a new developer
The new developer, Criswell Radovan, purchased the famed casino in April 2013 but was forced to close the facility five months later in order to give the property a much needed overhaul. With the increase in popularity of Native-American owned casinos in California, the fame of the Cal Neva has declined over the years. The goal was to reopen the gem in December 2014, in time for what would have been Frank Sinatra’s 99th birthday. However, the projected opening has been pushed back even further due to the bankruptcy filing.
The future goals for the Cal Neva
The new vision for the 10-story hotel tower will include a resort with “Sinatra-era glamor,” including a 6,000-square-foot casino, which is very small by modern casino standards. Starwood Hotels & Resorts Worldwide Inc., an international hotel chain, contracted to operate the Cal Neva as part of its “luxury collection,” with a plan to open the renovated facility next April.
How does bankruptcy affect retirement planning?
When individuals, much like businesses, find themselves in financial distress, they often consider whether to file for bankruptcy. In that situation, it is common to be concerned about losing assets. A particular worry is: how does bankruptcy affect retirement planning? Will you be able to keep your retirement benefits, you worked so hard to obtain? Some retirement benefits are protected, depending on how you handle them.
Cashing out before filing for bankruptcy
Actually, cashing out your retirement account before filing for bankruptcy is not the best idea. Believe it or not, retirement accounts have some of the broadest protections from creditors in bankruptcy. That is because they are normally either exempt or excluded from the bankruptcy estate altogether. The other reason you should not cash out your retirement accounts, is that there are severe penalties and negative tax consequences if you do so too early.
Qualified retirement plans are often exempt from bankruptcy
Under certain circumstances, debtors in bankruptcy are allowed to retain benefits from certain qualified retirement plans.” The United States Bankruptcy Code defines a “qualified retirement plan” as follows:
- any money or assets, payable to a participant or beneficiary from, or any
- interest of any participant or beneficiary in, a retirement plan or profit-
- sharing plan that is qualified under Section 401(a), 403(a), 403(b), 408,
- 408A or 409 of the Internal Revenue Code of 1986, as amended, except as provided in this paragraph.
Essentially, this means that the most common “qualified retirement plans” include profit sharing plans (including 401(k) plans), defined benefit plans, and money purchase pension plans. Generally, these are plans in which your contributions are not taxed until you withdraw money from the plan. That is the characteristic that makes them exempt.
If you have questions regarding retirement planning issues, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.