Question Inheritance during Chapter 13

[AndHereWeAre]

Hi, my father has some serious health issues and so our bk attorney suggested we ask my dad to modify his will such that anything my wife and I were going to inherit would instead go to our children. We've done something similar with our life insurance - kids are primary beneficiaries now instead of my wife and I for each other. FYI, I'm also dad's executor.

My dad discussed it with his attorney and after doing so, was told he does not need to change anything. So he is not going to. Period.

We are in the middle of C13 having just started our 3rd year this past April (woot!).

My dad does not have some vast fortune. He has his house (with a mortgage), household possessions, little savings and a small apartment in another state he rents out.

Were he to pass, we'd sell the house and split that with my sister along with the household stuff. We'd prefer to keep the rental apartment if possible.

Q- would the trustee take everything? I keep reading about this 180 day rule (and we are well, well past 180 days) and some articles say if we inherit after 180 days of filing, we can keep everything. Others say the trustee is going to come for it regardless of 180 days.

And dad, as noted, is NOT going to change his will. So what is going to happen vis-a-vis C13 were he to pass and what can we do w/o changing the will to best prepare for it. I especially do not want to lose family mementos/keepsakes, some of which may have small (< $1K) values.

Thanks!

[justbroke]

Estate planning is very important and I wish that more people did this. I think it was a good conversation that you had with your father. Here is my $0.02 ...

Q- would the trustee take everything? I keep reading about this 180 day rule (and we are well, well past 180 days) and some articles say if we inherit after 180 days of filing, we can keep everything. Others say the trustee is going to come for it regardless of 180 days.

This is a two-part answer.

First, we must talk about the 180-day rule. The 180 days rules is best summarized as, anything that you would inherit, or were entitled to inherit within 180 days of filing the bankruptcy, are subject to being part of the bankruptcy estate. Exemptions can protect some or all of these inheritances (and marital property settlements) based on available exemptions at the State and Federal level. Suffice it to say that the inheritance is exposed.

Second, the 180-day rule gets muddy for Chapter 13s. The first rule, discussed above, exists and is the general rule even for Chapter 13s. If you become entitled to the inheritance within 180-days of filing, the general rule applies. However, what happens if there is an inheritance after 180-days of filing? The same rule may apply. You may need to appease the Chapter 13 Trustee and pay in some or all of the inheritance into the Chapter 13 to satisfy the (hungry) unsecured creditors.

And dad, as noted, is NOT going to change his will. So what is going to happen vis-a-vis C13 were he to pass and what can we do w/o changing the will to best prepare for it. I especially do not want to lose family mementos/keepsakes, some of which may have small (< $1K) values.

See my answer above. We think of a Chapter 13 as a "pending" bankruptcy as it is held open much longer than a Chapter 7 liquidation. During that pendency, things can happen and how different Chapter 13 Trustees, districts, and States deal with this so-called "windfall" rule can be challenging. Your siblings, of course, can buy any portion of the estate from the Chapter 13 Trustee. (The Chapter 13 Trustee would actually like this, because it's an easy "liquidation" of sorts.) You could also offer to pay your part of the Estate into the Chapter 13.

I would just go back to my attorney and say that my dad is stubborn and I don't think we can prevent any potential issues related to an inheritance. Perhaps the attorney can find some exemptions to protect all or some of any potential inheritance.

I hope that your dad survives your Chapter 13 if not only so that you have more time with him. I hope that he is not in any pain.

[Carmella]

I am sorry to hear of your dilemma. I hope your Dad's health holds up for his/family's sake as well as to avoid the mess that will follow if he passes before BK is completed. It's a shame the conversation with his lawyer didn't go well. Is your sister involved? Because the aftermath of his death would effect her as well. If she will have to buy from the trustee or buy your share of the apartment to keep it in the family.

Are there keepsakes/mementos your dad would be willing to part with now? I am assuming they hold sentimental value and you wouldn't dream of selling them. Maybe he can gift them to you/your wife say something for your b/day or Christmas. *if this is kosher, they are small items financially under 1K* I doubt he would go for that since he didn't see the need for changing his will. Makes me wonder did he understand that his money will go to the trustee not to you or your family and that your sister will have headaches if she wishes to keep some things the trustee might be interested in?

If he feels the inheritance should pay your bills and not be a bonus to you that's one thing, but with property and a sibling involved it gets more complicated. Maybe he doesn't feel like he's going to pass in the next 2 yrs. Many people don't want to think about death and do not plan in the best manner.

[AndHereWeAre]

Thanks Carmella and justbroke for replying. Thought I had already responded to your posts but see now I did not. Apologies...

So, things are not going to get any better with my dad we realize now. He had an MRI recently and it shows sometime in the past he had a stroke along with chronic ischemia plus brain atrophy. That explains the rapid onset of dementia symptoms...

Along with his health, his finances are a complete mess. He's finally letting us look at them and he's overdue on credit cards, his HOA, taxes etc.

I've been trying to get him to sign a POA so we can try and manage some of that but at the end of the day, from what we have calculated, even if he pays just his core bills like mortgage (he's current on that), utilities and the like, he does not make enough money as he only gets 2K from SS and $700 from an apartment he rents. He will run about $500-700 negative every month.

Thinking through the options such as:
C7 - problem there is adamant he wants to stay in his house and we cannot take him in

C13 - it was quite a process for us to gather and file the needed documentation. Not sure how we would do that for a person who cannot help us much to collect that information, lives 3 hours from us in another county and even if he were approved, as noted above, still would be running negative every month.

Nursing home - Again, he does not want to leave his house and even if he did, from my research so far, he makes too much to go to one, yet does not have enough to go to some sort of assisted living center.

"Judgement Proof" - I've read some things on this but not sure how well it would actually work. He'd still be running negative though but without the hassle of filing for bankruptcy. But he also would not have the protections so not sure if this a good option really for a 79 year old or not.

As I mentioned, he does have that apartment he rents and were he to sell it, he might net $55K that he could use to plug that hole every month (but he would also lose $700/month in rental) so it might last about 3 years. But... if he files C13, that is going to go away. If he tries to be Judgement Proof, even if he moves the proceeds to another bank account, when those creditors file liens against him and win judgements, I'm pretty sure they are going to take that.

Kinda at wits end on all this. I feel like need an Elder Law / BK attorney to discuss this but not quite sure which and after a free consult, some of which are only 30 mins, neither we nor he have the money to pay beyond that.

I'm also looking for an elder care forum like this for advice.

Anyway, sorry to go on and on about this, especially since it not directly germane to this forum...

Thanks for listening :-)

[justbroke]

I wish I could help you on Elder Law which is an area of law that I've thought about pursuing... since it's big here in Florida. You're in a tough spot and there are no easy solutions. Primarily because there is debt and there is still a bunch of ongoing expense that won't stop.

Personally, I'd still sell the apartment.

An "immediate annuity" with an initial funding of $55K, for a 79-year-old male, would give $515/month for life, $963/month for 5-years (certain), and $529/month for 10-years (certain)***. Something to think about if planning to sell. If you just spent down the $55K at $700/month -- notwithstanding inflation -- that would only get you about 6.5 years of coverage.

It's time to take out the calculator, a spreadsheet, some paper, and try to find the optimum solution. That's the limit of my experience and expertise. I wish I could help you more.

*** source: https://www.immediateannuities.com for an "immediate" annuity

[Carmella]

AndHereWeAre Find an elder attorney ASAP. It's been many years, but I was a legal guardian for my elderly Aunt. Having an attorney makes a huge difference. They charged us based on her income. Some elder law attorneys cost an arm and a leg.

I work in a nursing home. If your father has a diagnosis of dementia, it might be harder to get POA because he might not be competent to agree to POA. That said it's better to get POA sooner than later. There are two types financial and health care decisions.

The apartment and house will need to be sold if he ends up needing nursing home care, if his health or mental status declines further.

Assisted living, did you look at several places? Some will allow you to stay if you pay a year or two in advance. Again, that probably means selling the house and apartment.

If there's no family to available to take him in the harsh reality is Assisted living or nursing home.

His financial problems/not paying bills, etc may be a symptom of his stroke /ischemia/dementia and he may not listen or have the higher-level executive brain function to really understand what's going on or how it will affect him/his kids in the future.

Something you must know is that if he goes into a nursing home if he has gifted you or anyone money in the last 5-7 years (check with an attorney since it varies in different states) you may need to pay that money back. Actually, a good elder law attorney can give you all the info you need because I know it varies from state to state. In Florida a family member can stay in the house until the person passes away then the house is sold, and money goes to nursing home/medicaid. In Ohio only a spouse can stay in the house otherwise it has to be sold.

I don't want to sound totally pessimistic, but if his health continues to fail and if he lives a while these issues will come up at some point.

Obviously, an attorney is the best to get information from but based on my personal experience as a legal guardian and as a nursing home employee I always tell people DO NOT sign over the financial accounts to the nursing home if a person is admitted. You can keep control of them, you might need to become a legal guardian if you are not on the account and pay the nursing home monthly. As I said I am not an attorney, but at least in my state I see problems with this all. This is part of the reason finding an elder law attorney will protect your dad's best financial interest.

[Barbisi]

AndHereWeAre, I am sending you positive vibes and best wishes for a better outcome than the direction that this very sad story seems to be heading.
I cannot offer any suggestions from my own experience since my late mother was totally lucid until her final 48 hours on earth. She had no property or money to leave behind; all that disappeared when my husband was laid off for the first time in late 2002 and we had to use the last of her home sale savings to live on until the proceeds ran out.
Somehow I hope you are able to avoid what sounds like trench warfare with the court - good luck!