Mother in Laws Monies in Our Account

[jersona]

Hello everyone. I posted this in the Chapter 13 section but this might be a better category to post this on. I am a newbie to this forum so bear with me if I don't know all the terminology of bk's. My wife and I are currently filing a Chapter 13 in San Diego, CA and got all the paper work submitted to the attorney's almost ready to file (a lot of work). The only sticking point now as our attorneys are assembling the final proposal to the trustee is that we show too much equity on paper since my business value is about $21,000 and my wifes Money market account shows $34,000, $30,000 belongs to my mother in law for safe keeping just in case she (or my father in law passes) away. The past few years my mother in law was going through some tough times since my father in law suffered a stroke a few years back and is in a skilled nursing facility practically a vegetable. Add to the fact shes was diagnosed with Type 2 diabetes and has to go to dialysis 3 times a week and have insulin shots. She decided a few years ago to make my wife the trustee in charge of the $30,000 of her monies just in case one or both of the parents passed. The problem is, according to our attorney we cannot exempt this amount since it looks to the trustee that is it ours and must be available to pay some of the unsecured debt we incurred. The biggest problem is that this makes the payment plan payment like $2400 and we definitely can't afford that! Is there any way that anybody knows if we can draw up some kind of "oral trust" with my mother in law stating that the monies were not "ours" and belong to her and we have the monies in the account for safe keeping just in case she did pass? That's the god honest truth anyway. That is why we didn't spend it or use it to pay any debt. Disclosing this to our attorney a few months back when we did the initial consultation, she said NOT to move it out since it will look suspicious to the trustee so we left it there in the Money market account. My mother in laws name is not on the account nor is she a cosigner. It technically wasn't ours anyway. Can we have a letter drawn up by my mother in law stating that the $30,000 is hers and we just kept it in out account for safe keeping and will the trustee accept this? Thanks everybody for your help. My wife and I are really stressing about this.

[Pandora]

I know hindsight is 20-20, but what should have been done is to open a Custodial account or do a limited Power of Attorney type of thing when all this first happened. MIL's name should have remained on the account - whatever type you set up.

I dont think the trustee will accept a hand written note from your MIL, unfortunately. I think to even attempt at trying to show it was hers from teh beginning, you'd have to show a paper trail from the very beginning of when the money first left your MIL's account and went into yours to even begin to unravel it all. Bottom line is its in your name, therefore its an asset to you and your wife and has to be exempted, or - you end up paying it back in your plan.

[Flamingo]

The only possible way out of this is to speak with an Estate planning lawyer and have your MIL there and go over the entire situation. Since that money is under your wife's name, she has access to it and it is an asset. Your MIL's name is not attached to it at all. It is all word of mouth at this point and is money available for your access/use.

[jersona]

I know hindsight is 20-20, but what should have been done is to open a Custodial account or do a limited Power of Attorney type of thing when all this first happened. MIL's name should have remained on the account - whatever type you set up.

I dont think the trustee will accept a hand written note from your MIL, unfortunately. I think to even attempt at trying to show it was hers from teh beginning, you'd have to show a paper trail from the very beginning of when the money first left your MIL's account and went into yours to even begin to unravel it all. Bottom line is its in your name, therefore its an asset to you and your wife and has to be exempted, or - you end up paying it back in your plan.

Thanks everyone for your advice. I know hindsight is 20/20. I didn't know we would be declaring a Chapter 13, if I did, I wouldn't have my wife deposit that money! In any case, there is a paper trail showing the deposits from my MIL. I just don't want this money to be available to the creditors for the unsecured debt since it isn't our money (and my MIL would kill us). I would have taken this money months ago when we started this process in Feb, but my attorney said not to. I'm just thinking we should move it NOW and try to file in 6 months so that $30K doesn't show up on the bank statements. My attorney is going to talk to her senior partner Monday to see what his ideas are. There's no way we can afford the payment plan drawn up by my attorneys, it's just a recipe for failure. Can I still do a 7 on the unsecured?

[Pandora]

you cant pick and choose part of BK - you either file a 13 or you file a 7 - you dont get both . Even if you do qualify for a 7 (over means but -DMI) - you'll end up giving that 30K up if you cant exempt it and it will go to creditors.

Dont remove it from your account now - it will look suspicious - and I think the timeframe will still be applicable even if you wait 6 months to file. As Flamingo stated, it may be best to consult with an estate attorney and try to find out how to go about all of this. In the end, it may just be that you end up losing your MIL's money - or you give up some other assets to keep this one.

Tough situation you're in....

[LadyInTheRed]

A little clarification about an oral trust. You can't go back now and create an oral trust. The question is whether your MIL created an oral trust at the time she gave the money to your wife. If she said "here's some money I'm giving to you as trustee to hold and use for me and my hubby." You can read the CA law that allows this at http://law.justia.com/california/cod...200-15212.html (see sections 15200 and 15207). More questions: What is clear and convincing evidence of an oral trust? How can you prove the existence of an oral trust and did your MIL have to actually use the word "trust" or "trustee" to establish an oral trust? Good questions for an estate planning attorney.

It's good to hear your attorney is investigating the possibilities. Don't get your hopes up too high. It'll likely be a fight. Maybe your MIL should consult with a BK attorney who represents creditors to explore filing an adversary proceeding in you BK. That won't be cheap!

One thought: If the $30k was a gift, your MIL would have had to file a gift tax return. Perhaps the lack of a gift tax return can help prove her intent that you hold the money in trust. Maybe not too convincing, but it may help when combined with other evidence.

[jersona]

Thank you again, LadyInTheRed for your advice. My attorney is going to contact me tomorrow after speaking to one of the Senior partners to see what she can do. Wish me luck and thanks again.

[LadyInTheRed]

Thank you again, LadyInTheRed for your advice. My attorney is going to contact me tomorrow after speaking to one of the Senior partners to see what she can do. Wish me luck and thanks again.

Good luck! Please let us know how it goes.