Question regarding pending life insurance disbursement

[Llelxon]

My signature lists all of the dates that my wife and I filed chapter 7. We are currently discharged but still open due to an asset case (tax refund).

My MIL passed away this past weekend and it turns out my wife is listed as the beneficiary on the life insurance policy (didn't know prior). I know that the trustee can take any gains from a death, but how is this calculated?

The policy was only $10,000 and the will states it is to be used for payment of funeral and medical costs, etc and any remaining was to go to her adopted daughter (not my wife). Does the will override the beneficiary listed?

[LittleB72]

I can't answer your question but I will tell you that even a basic funeral is very expensive. There probably won't be anything left of the 10K (unless your MIL had pre-paid for some of the expenses). So, it may be a moot point.

My grandmother's funeral early February of this year (Ohio) was around 20K. Nothing elaborate and the plot had already been paid for.

[BCA2009]

Obviously, you need to an attorney. But in the limited exposure that I have had to dealing with estates. If the policy named you as the beneficiary, the policy is not part of the estate and is not covered by the will. Had your MIL wanted the proceeds to be used for used for a specific purpose she should have listed her estate as the beneficiary.

So, I believe that the trustee probably has a valid claim on the money.

In the end you need to consult with an attorney experienced in these matters.

[BKDefender]

Llelxon: Any life insurance proceeds that go to your wife within 180 days after filing bankruptcy will be property of the estate and go to the trustee. If the life insurance policy lists your wife as the beneficiary then your mother-in-law's will has no legal binding effect whatsoever as to how that money is spent.

I know that your wife would use it to pay the funeral and medical costs since it was her mother, but legally, that whole amount is property of the estate and out of your wife's control as to how they are spent. Whether the trustee uses it to pay for the funeral is up to him/her.

--William

[nickifan]

Llelxon: Any life insurance proceeds that go to your wife within 180 days after filing bankruptcy will be property of the estate and go to the trustee. If the life insurance policy lists your wife as the beneficiary then your mother-in-law's will has no legal binding effect whatsoever as to how that money is spent.

I know that your wife would use it to pay the funeral and medical costs since it was her mother, but legally, that whole amount is property of the estate and out of your wife's control as to how they are spent. Whether the trustee uses it to pay for the funeral is up to him/her.

--William

Okay...but how does the trustee even find out about this? Do you sign something at the 341 that says you'll tell him within six months if you come into such money? If there is no death notice in the paper, for example, assuming someone in the trustee's office is even reading the obits and remembering that one of the "survivors" listed filed a BK -- how would they learn of it? You have to tell the life insurance company to send the check to the trustee? Just wondering how this really shakes out, logistics wise....

[BKDefender]

The trustee finds out about it the same way he/she finds out that you have $5k in household goods - you tell him/her because you are required by law to disclose all of this information to the trustee.

If the trustee ever finds out that you failed to disclose estate property worth $10k then he/she can reopen your case and have it dismissed and all of your debts come rolling back to existence.

In addition, if your bankruptcy attorney knows about the life insurance, and you don't disclose it, the bankruptcy attorney is legally required by law to disclose it to the trustee because if not then he/she will be aiding the commission of a crime.

--William

[Llelxon]

This whole thing just seems like it is completely crazy....I knew that my wife would probably be the executor of the estate, but having to list the beneficiary as the "estate" is just over the knowledge level of the average person until they have dealt with this.

My MIL was very poor, her only income was SSI. If they take the 10K, we will be stuck paying for the funeral out of our own pocket....and we don't have any money either.

My wife said the funeral director can bill the life insurance directly versus it being distributed to her...does this matter at all?

[BCA2009]

This whole thing just seems like it is completely crazy....I knew that my wife would probably be the executor of the estate, but having to list the beneficiary as the "estate" is just over the knowledge level of the average person until they have dealt with this.

My MIL was very poor, her only income was SSI. If they take the 10K, we will be stuck paying for the funeral out of our own pocket....and we don't have any money either.

My wife said the funeral director can bill the life insurance directly versus it being distributed to her...does this matter at all?

Not at all, it doesn't matter what good intentions you plan on spending the money on. Maybe your trustee will have sympathy,but I wouldn't spend any of it until you talk with your attorney and the trustee.

[Llelxon]

You know I now understand how people can go postal.

[Llelxon]

Well I talked to my attorney this afternoon and he said not to worry about it. He inquired about my MIL's estate and how much else there is, I told him nothing she has collection notices and has no money.

He said don't worry about it....should I just trust him telling me that?