{"id":164,"date":"2012-06-07T01:27:16","date_gmt":"2012-06-07T01:27:16","guid":{"rendered":"http:\/\/www.fremont-bankruptcy-attorney.com\/blog\/?p=164"},"modified":"2021-05-04T22:35:29","modified_gmt":"2021-05-04T22:35:29","slug":"how-does-my-potential-inheritance-in-a-will-or-trust-affect-my-bankruptcy-case","status":"publish","type":"post","link":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/2012\/how-does-my-potential-inheritance-in-a-will-or-trust-affect-my-bankruptcy-case\/","title":{"rendered":"How Does My Potential Inheritance in a Will or Trust Affect My Bankruptcy Case?"},"content":{"rendered":"

By Ryan C. Wood<\/a><\/p>\n

Are you listed as a beneficiary in a will or trust?\u00a0 If so, will it be an issue when you are filing for bankruptcy?\u00a0 You are not entitled to anything because your loved one is still alive and well.\u00a0 Most potential clients believe this is not an issue that needs to be addressed when filing bankruptcy, but leaving out a potential inheritance (which is a \u201ccontingent interest\u201d) in a bankruptcy petition could be a huge mistake.\u00a0 Most bankruptcy lawyers<\/a> have a question on their intake form asking if you are named in any wills or trusts as a beneficiary.<\/p>\n

A contingent interest in a will or trust on the filing date of your bankruptcy petition is considered to be part of your bankruptcy estate.\u00a0 This means if within 180 days of the filing of your bankruptcy petition your loved one passes away and leaves you an inheritance, the contingent interest becomes a vested interest.\u00a0 Whatever you are entitled to in the will or trust will be counted as an asset in your bankruptcy case and part of the bankruptcy estate.\u00a0 If this interest cannot be adequately protected because you do not have enough exemptions to cover the amount of the inheritance, then the unprotected portion of the inheritance may be subject to creditor\u2019s claims.\u00a0 If you have a 90 year old grandmother who is leaving your $5 million in her will or trust and you are thinking about filing bankruptcy, you should seek the counsel of an experienced bankruptcy lawyer<\/a> to discuss timing and options.<\/p>\n

Spendthrift Trust<\/span><\/strong><\/p>\n

Spendthrift trust provisions are sometimes included in a trust document to prevent a creditor from going after a beneficiary for the entire inheritance.\u00a0 Spendthrift trust provisions are allowed under California law but there are certain restrictions.\u00a0 Under California Probate Code Section 15306.5, \u201ca creditor may obtain an order directing the trustee to satisfy all or part of the judgment out of the payment to which the beneficiary is entitled under the trust instrument\u2026as long as it does not exceed 25% of the payment that would otherwise be made to the beneficiary.\u201d\u00a0 This means that 75% of your interest is protected with 25% potentially going to your creditors.<\/p>\n

Necessary for Support<\/span><\/strong><\/p>\n

Although creditors could potentially go after a beneficiary\u2019s interest in the spendthrift trust, creditors are still limited under California Probate Code Section 15306.5(c).\u00a0 This section indicates that amounts which are \u201cnecessary for the support of the beneficiary and all the persons the beneficiary is required to support\u201d are exempted.\u00a0 This means that if you can prove that all the benefits of the inheritance are necessary for the support of you and your family, creditors will not be able to reach those benefits and the trustees of the trust will not be required to pay the creditors.\u00a0 There are different ways of proving that the amounts are necessary for your support in your bankruptcy case.\u00a0 You should consult with an experienced bankruptcy attorney to ensure your inheritance is protected as much as possible in your bankruptcy case.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Ryan C. Wood Are you listed as a beneficiary in a will or trust?\u00a0 If so, will it be an issue when you are filing for bankruptcy?\u00a0 You are not entitled to anything because your loved one is still alive and well.\u00a0 Most potential clients believe this is not an issue that needs to […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[34],"tags":[],"_links":{"self":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/164"}],"collection":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/comments?post=164"}],"version-history":[{"count":5,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/164\/revisions"}],"predecessor-version":[{"id":1169,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/posts\/164\/revisions\/1169"}],"wp:attachment":[{"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/media?parent=164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/categories?post=164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fremont-bankruptcy-attorney.com\/blog\/wp-json\/wp\/v2\/tags?post=164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}