My mom is worried about her will

[Justpoor]

Hi all. Mom called last night and she is worried about her will. When she dies I apparently will have inheritance. She does not want me to lose that in the bankruptcy if the timing just happens to fall that way. Her question is: 1. Wil I lose the inheritance to the trustee? From what I've read the answer is yes. and 2. Is there any way she can prevent me from losing it? I think she is thinking like a trust fund or something for my boys. So what do all you brilliant, helpful, and wonderful people think?

[dingdong]

CAn she create an irevvocable trust with a spendthrift clause?

[dingdong]

Read this

http://pritchardlaw.com/Bankruptcy%20Estate%20Beneficiary.pdf

I am not sure whether the information re estate planning is still valid ( the info is from 2000), I am not an attorney, and I haven't done any significant research on spendthrift clauses and BK, but it will give you a general idea of how these particular clauses may work in estate planning and how they pertained to BK in the instances cited.

[justbroke]

Wow... dingdong to the rescue! And she brings up a good point. If it's in an irrevocable trust, that means the Trustee can't take control over it, because the beneficiary/beneficiaries are basically etched in stone. So Trustee can't step into the shoes of the beneficiary and take their value. That means, it never become property of the Bankruptcy Estate.

I was looking at these as a life planning tool, but hadn't considered if one of my beneficiaries were to file for Bankruptcy. I have found, only in research though, that
Trusts are a good way to manage your Estate in the present and after life.

However, they require careful planning and a good estate planner and/or lawyer.

[Justpoor]

Thank you DingDong and Justbroke! I will talk to her about that and she can take it up with her lawyer. I really appreciate the info.

[danaf]

Trusts can also be costly to set up properly. You being in her will would only really be an issue up to 6 mos after discharge IF she passed. Otherwise, being in her will is not something you have to disclose per say. I wouldn't disclose it because a lot of times, people don't even know when they are in wills. You could just as easily have her replace your name with those of your children in the will. That would be a lot cheaper.