Question Will the trustee take away the life estate from my 82 year old grandmother?

[macanno]

My grandmother has gotten herself in trouble with credit cards and needs to file Chapter 7 bankruptcy. She lives on a fixed SS income. She resides in a condo in which she has a life estate remainder to a trust. According to the IRS tables and the calculations I have made the LE value to her is just over $50,000. Will the trustee kick her out and try to find a investor to pay for this LE interest or will he/she leave it alone due to lack of marketability?

[despritfreya]

From what you have posted it appears that YOUR GRANDMOTHER SHOULD NOT FILE BK. If her only source of income is Social Security and she has no assets (a creditor is not going to mess with a LE), she is judgment proof. Do not put her though the stress of a bk. She should ignore the phone calls, change her number, etc. If a creditor sues and gets a judgment how is that creditor going to collect?

Talk to a bk attny. Consultations are usually free.

Des.

[MSbklawyer]

I concur with Des. She's judgment proof. Why file?

Going further though, in most states, life estate interests are exemptible as homesteads as much so as outright (fee simple) ownership interests are. Could she not exempt her interest in the condo as her homestead?

[macanno]

Thanks for the responses. Here is a little more information. She does have approximately $9000 in bank accounts and investment accounts - exemptable if she can use the wildcard. Again, I still really don't have an answer to the original question re: will the trustee try to take the Life Estate interest she has?

[frogger]

But you still haven't answered the question posed to you:

Why file?

[macanno]

why file? to keep creditors from trying to take money from her bank accounts; to stop the harassment she is currently enduring. Now, how about an answer to the original question.

[SunshineGal]

I believe (not an attorney) that the trustee only has as much power over assets as the debtor. So in the case of a life estate, it would really depend on how that trust is written. Who controls the trust? Does your Grandmother have the ability to sell or refinance the condo? Generally, all a life estate really does is give the beneficiary the right to live there for the remainer of her life, the trust now *owns* the property.

If it were me...I would dig out the full trust documents along with a copy of the deed and go see a few attorneys, they will be able to give you a better answer after they see the paperwork.

I do have to agree with the other posters though. Your Grandmother is what they call "collection proof". The creditors can file all the judgments they want to, but there is nothing for them to collect. A creditor is not going to try to force your 82 year old Grandmother out of the condo.

[despritfreya]

The next question:

What is the source of the $9,000.00 - is it SS?

Des

[AngelinaCatHub]

You imply this is a Trust. IF it is a Charitable Trust (Charitable Remainder Unitrust or CRUT) the property belongs to the Trust not your Grandma. She has an "Ownership" in a Life Estate and in reality has no real value. You cannot sell a life estate. It depends a lot on the Trust as revocable or irrevocable. What is the Trust? Also, if the "investment" accounts are in items such as IRAs and other holdings set up as retirement, they cannot be levied.

I lean with the majority on your thread, as a bk is stressful enough but could kill an 82 year old lady. Consider C&D letters. By law once a C&D is presented, they cannot call again. Remember her age, if a charge against a Senior is made, it could hold more power as damage to a Senior person is looked upon with more prejudice. Just my thoughts. 'Hub

[AngelinaCatHub]

One other thing to add on behalf of MSbklawyer and Despritfreya, who are both lawyers. If your Grandmother can be gotten at by a Judgment, she then is also an asset case in a C7. If she is not an asset case, she is protected. Why put her through a bk? She would lose in either case if her funds are available to attachment. 'Hub