Bankruptcy vs Inheritance = Options

[jackson15]

Just as I was about to file for bankruptcy, my mother passed away. As the will reads, I stand to inherit a 20% share a of her estate, with my sisters heir to the other 80%. The estate mainly consists of my mother’s home. As my mother just passed, we aren’t in any rush to sell. Maybe comes spring. When it is sold, my share would be somewhere around $50K.
My attorney is telling me to hold off, wait to the estate is settled. We then look into ways I could protect myself spending the money, like paying off some back child support, paying off a student loan, and/or making some repairs to the home I now live in. Then file afterwards.
I’m just curious, what other options I might have to protect myself. I would like to keep some of the inheritance as cash, since it’s been so long since I’ve really had anything.
Any advise, ideas, or suggestions would be sincerely appreciated.
Thanks Jackson

[HHM]

Your attorney sounds like they are on the ball...the only other options would be to dump "some" of the money into an IRA, assuming you are otherwise eligible to have an IRA (e.g. employed).

[AngelinaCat]

Some estates can take years to settle. You need to discuss this thoroughly with your attorney. Also, you may wish to consult with the Administrator of your Mother's estate, and/or the attorney for your mother. Perhaps your attorney can talk with that attorney...?

My condolences on the passing of your Mother.

[LadyInTheRed]

Using the money to pay non-dischargeable debt makes sense. But, another possibility occurs to me, but I'm not sure it is a better option. Do you own your own home? If not, is it possible to have the home distributed to you and your sisters so you are 20% owner and then you move into the house? You could then pay your sisters 80% of fair market rent and use the homestead exemption to protect your 20% interest. You and your sisters can sell the house after your BK is closed, unless you all want to continue with the rental arrangement. This will only work if your mother had sufficient assets other than the home to pay any debts she had and expenses of administration of her estate. Something you can run by your attorney if your sisters and the administrator of your mother's estate will cooperate.

[Flamingo]

First remember a bankruptcy is based on your financial position on the day you file. Since you now have what could possibly be a good chunk of money available over the next year or so, that changes things for you and your financial picture. There are now funds that will be available that could go to your creditors. We received an inheritance during our Chapter 13 Plan and a portion of it was taken by the trustee. I highly suggest listening to your attorney (you did not say whether or not you retained this attorney yet but you did state you were just about to file for BK) or get a few more consultations regarding this and also maybe speak with the executor/executrix of the estate to see if an attorney is involved and get a consultation with them as to the situation.

[tobee43]

some excellent suggestions you have been given.

now, my question is this, some of the trusts and wills also list that an executor can "hold" a property for all types of reasons prior to selling it and distribution: i.e. our terrible housing market which has taken a big bite our home values, i'm can't say for sure, but most likely in this market, it will reflect you are yours taking a loss on the property if sold at this time. i have recently seen a trust which can hold off sale of any property for 20 years, which i'm certain is not the case here, however, i'm just wondering due to the down market if that's a possibilities and how that would effect your situation.

angelinacat points out, some of these situations take YEARS to settle and finally release and distribute the assets. one situation on the top of my head dealt with an estate where an atty, very much on top of everything, was the executor and also wrote the will and the trust, yet the probate court held the estate for over 3 years before anything was distributed. that's a long time to hold off! and, i'm not saying it would be your situation, but who knows how long it will be held up in probate.

both Lady and Flamingo have some excellent thoughts that i would run by your atty, just to see the possibility of maybe applying one of those ideas. also the IRA idea would be a perfect solution as well!

best of luck to you and yours and so sorry about your mom!

[jackson15]

Thank you for all the information. It helps ease my mind a little.

First off, my inheritance would not pay off 1/2 the debt I'm in. Second, I've been so broke for so long, that I would like to keep something from the inheritance to fall back on. I want, and truely need, a FRESH START.

Third, I haven't exactly retained a BK attorney yet, as he is the one that told me to hold off. Until the estate is settled.

The adminastrator of the estate is my younger sister, and the attorney for the estate is my cousin. I have two other sisters and they are all willing to work with me to protect my best interests under the letter of the law.

Far as moving into my mothers house, that is one thing I was looking into and trying to figure out how that might work. Yet I live in another state, 430 miles away. To say the least, would make things more difficult, and put me out of the new job I just started.

I do not own the home I am now living in, but could possibly have the ownership transferred to me, then spend money making home repairs that would also be exempt, or so I understand it that way.

I'm doing my research. Looks like I'm going to have plenty of time before I'm able to file, and figure out the best avenue to take.

I did ask the BK attorney about an IRA and he didn't really give me a straight answer on that. I've been self employed the better part of my life and really don't have any retirement set up. I just turned 50 and looking at $235 a month at 65.

Keep coming with the ideas. Not that I'm expecting one brainstorm but if I use a little bit of everything, I'm pretty sure it will all work out.
THANKS AGAIN,
Jackson

[ValleYum]

Could he safely put 5k into a Roth IRA?

So sorry for your loss, Jackson.

[LadyInTheRed]

now, my question is this, some of the trusts and wills also list that an executor can "hold" a property for all types of reasons prior to selling it and distribution: i.e. our terrible housing market which has taken a big bite our home values, i'm can't say for sure, but most likely in this market, it will reflect you are yours taking a loss on the property if sold at this time. i have recently seen a trust which can hold off sale of any property for 20 years, which i'm certain is not the case here, however, i'm just wondering due to the down market if that's a possibilities and how that would effect your situation.

angelinacat points out, some of these situations take YEARS to settle and finally release and distribute the assets. one situation on the top of my head dealt with an estate where an atty, very much on top of everything, was the executor and also wrote the will and the trust, yet the probate court held the estate for over 3 years before anything was distributed. that's a long time to hold off! and, i'm not saying it would be your situation, but who knows how long it will be held up in probate.

Regardless of how long it takes to distribute the assets from the estate, his right to a future distribution is an asset of the BK estate. If not exempted, it is subject to liquidation by the trustee, even if the trustee has to keep the BK open while awaiting distribution.

[tobee43]

Regardless of how long it takes to distribute the assets from the estate, his right to a future distribution is an asset of the BK estate. If not exempted, it is subject to liquidation by the trustee, even if the trustee has to keep the BK open while awaiting distribution.

good point, so here we find out there are NO statue of limitations with an asset case! those trustees can keep the case open as long as they want.

maybe between all the siblings they can buy back the OP's share, the trustee would get to that point anyway to allow an option to the other owner/s for a buy out. so, if they valued OP's share at 4k ( an example) each sibling would just have to come up with 1k to buy out the OP's share. i like that one LOL!! actually, i have seen it done prior to a bk, not with an inheritance, but with a partnered owned piece of property where the other owner brought out the person's share. it turned out to be a small amount a year prior to filing and although this person had to list the deed transfer on their petition, it ended up being no problem. that happened in nj about 5 years ago, and i do know things are changing now in these court rooms all over the country. where there is anything to be had, it seems as though the trustees are being more aggressive.

[Flamingo]

Note - the OP will need, at the time of filing if she files, to state that she was not the beneficiary of any estate for a certain period of time prior to filling (the lookback period can be anywhere from six months to two years) and will also have to state that she does not expect to receive any inheritance, etc. during the course of the Plan. I suggest the OP sit down witih qualified counsel as to this situation in her state to determine what, if anything, can be done in the event she needs to file...

The OP also financially has to be in a position to be able to file BK...she may not be insolvent.

[tobee43]

Note - the OP will need, at the time of filing if she files, to state that she was not the beneficiary of any estate for a certain period of time prior to filling (the lookback period can be anywhere from six months to two years) and will also have to state that she does not expect to receive any inheritance, etc. during the course of the Plan. I suggest the OP sit down witih qualified counsel as to this situation in her state to determine what, if anything, can be done in the event she needs to file...

The OP also financially has to be in a position to be able to file BK...she may not be insolvent.

excellent point, i think here in flordia we have a few items on the petition asking within 2 years of the date of filing did you....

actually, if i recall, which i may be incorrect, there is even one question asking within a 10 year period.

if the OP sits with a professional that help make a determination of her position she will be far better off.