Bankruptcy and Wills

the-muffin-man

Hi All

I was declared BR on 26th Jan 09 and we've just gone through the process of my wife buying the BI out on our house.

We have a little girl (6) and obviously we want her to be cared for if one of us were to die. We went to see a solicitor the other day about a will (who admitted he wasn't a specialist in bankruptcy cases) and he seemed to think that if my wife died the interest in house would automatically pass back to myself and that the OR could then come back on to me for it. This would be a big chunk of asset as her life insurance would pay off the mortgage/home loan.

I thought that once the BI had been bought then the OR can have no further claim on the house no matter what happened, but the solicitor seems to think this may not be the case.

Has anyone else gone through this procedure that could help me?

debtinfo

hi there are two different things going on here, as you have mentioned you have dealt with the asset as it was at the day of the bankruptcy order.

The issue you mention is after aquired assets, which are assets that become yours between BO and discharge. if the house passed back to you then this is a new asset and would be claimable

localhero

The solicitor shouldn't be getting involved in preparing Wills if he was unable to advise upon this matter.

If your wife or any other relative want to keep money away from the Official Receiver they need to incorporate a discretionary trust in their Will. The Trustees would then be able to pay you the proceeds when it is safe to do so.

To prevent your house passing automatically to you, you or your wife could change the ownership to tenants in common.

My advice is to get yourself in front of someone who knows what they're talking about.

Baggysdad

I have no idea was BR, OR and BI mean, so the first post is meaningless to me.

But I do know about Wills.

The house should be in the sole name of your wife.

On the assumption that the value of her estate is below the IHT allowance (currently £325,000), your wife should make a Will leaving her entire estate in a discretionary trust with you, your daughter, future children and future grandchildren as potential beneficiaries. Her will should appoint trustees to manage the trust. This cannot be you until your bankruptcy is discharged and it should not be a solicitor because they will charge. It should be someone who knows and understands your views, circumstances and outlook on life - another reason for not appointing a solicitor. The trustees will have powers to manage and distribute the trust assets for the benefit of the beneficiaries - who include you. As the assets are 'owned by the trust and not owned by you, they are out of reach of your creditors. IF the Will has the appropriate powers, they will enable you to live in the house and it will still qualify for exemption from capital gains tax when it is sold - even though you don't own it - as the trustees 'own' it.

When your bankruptcy is discharged, the trustees can transfer the trust assets to you and close down the trust.

The only downside to this plan is that income from money held in the trust is taxed at 40% - and from next April it will be taxed at 50%. But there are ways of investing money for capital growth so income isn't generated and you can take 5% per year of the capital and this is classed as return of capital, not income, so no income tax.

The other downside to this plan is if your house is worth more than the inheritance tax allowance, there are further ongoing tax issues for the discretionary trust.

As localhero says - get yourself in front of a Willwriting specialist.

B

the-muffin-man

Thanks for the responses.

In defence of my solicitor what Baggysdad posted is pretty much what he told us- and setting up trust is what he advised. He was just going to run it past a bankruptcy specialist within the firm.

The doubt came from me as I though that when the beneficial interest in bought, then the receiver had no further interest in the house - that's obviously not the case!

Thanks