Bankruptcy & Inheritance

Bankruptcy & Inheritance

I recently filed for bankruptcy and the plan was approved last month. A relative died this week and left me money in the will. Do I have to turn the money over to creditors?


I hate to punt (and I don't even play for the Jets!) but I'm not a bankruptcy expert. You really should bring it to the attention of your bankruptcy attorney and find out what your obligations are. But here are a few thoughts: o Read the will carefully (better yet have an estate planner do it for you). o If your inheritance is in trust you might be protected. Period. Confirm this with your bankruptcy attorney. The book Inherit More (Shenkman, John Wiley) has a chapter explaining the "hows and whys" of using trusts for inheritance in this manner. o If the bequest is out-righth to you AND if your bankruptcy expert says you may or will loose the funds, then have your estate attorney review the will to determine what happens if you disclaim the inheritance (renounce). This requires you to file certain documents in court and take other legal steps within 9 months of the death and before accepting any benefit of the funds. If this happens, depending on the will, state law and your situation, perhaps your children or other family members will receive the assets instead of you. If this would occur, and IF the result is preferable, confirm one last time with your bankruptcy attorney that this won't raise and bankruptcy flags. The book, Shenkman, The Complete Probate Guide, has a discussion of disclaimers.

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