It is not uncommon for an individual or family to file bankruptcy, knowing they will inherit a large sum of money upon the death of an elderly relative. The U.S. Bankruptcy Code has special provisions for inheritance. Below is a brief explanation of the way the Bankruptcy Courts typically treat simple inheritance assets.
If you become entitled to inherit any money within six months of filing for Chapter 7 bankruptcy, the inheritance will be assumed by the bankruptcy trustee as property of the bankruptcy estate. In short, you may forfeit the inheritance, so timing of filing your petition is an important decision.
If you have already inherited the money, it is often best to place the money into a trust account, with provisions that include "anti-alienation" language. This simply means that the money in the trust is protected from claims by creditors and will not be included as personal assets on the petitioner's schedule of income, assets and debts. Earnings distributed from the trust account, typically on an annual basis, will be recognized as income, however.
Chapter 13 petitions treat inheritance money differently. The inheritance is considered property of your estate and can be administered by the bankruptcy trustees as part of your confirmed payback plan. Like Chapter 7, any annual distribution from a trust account must be reported and treated as income.
We Can Help You With Strategic Planning
If you have an inheritance that you have already received, or will receive in the future, there are strategies for protecting it. Learn more about bankruptcy and your inheritance trust. Call an experienced Florida bankruptcy attorney at The Golden Law Group. We are ready to answer all of your questions about bankruptcy, debt relief and illegal collections practices.
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From three convenient office locations, we represent individuals, families and business owners in bankruptcy matters in Bradenton, Brandon, Sarasota, Tampa and communities throughout the Florida Gulf Coast region. If you are over your head in debt and don't know where to turn for relief, turn to us. Contact us today for a free, no-obligation consultation.