Bankruptcy, debts and a bequest....

maxmycardagain

A fellow of 21 is left £50,000 in a will (cash) but cant have it till he is 25, but is looking at bankruptcy owing about £13,000....he isnt working

Obviously he cant pay his debts cos he has no money

What happens with his bequest, does the IS keep him BR till he gets his bequest and then he can pay them and get the BR anulled?

maxmycardagain

79 views and not 1 reply, is this a first?

"The question the MSE collective couldnt answer"!

silvercar

I thought the answer would be to persuade creditors that the money will be available in a few years time, so no need to go bankrupt now.

He isn't working now, but does he intend looking for work while bankrupt? If he finds a job and that leads to an IPA he could have to declare the inheritance while on an IPA ( depending if the IPA started before his 22nd birthday).

I didn't answer before because I thought you wanted the legal answer as to whether the OR could put a charge on the trust fund. I don't know what the answer to that is.

It is a theoretically interesting point as not everyone would be aware at 21 that they have something coming to them at 25. If they were much younger when they were left the money, they may never have been told about it.

Anondebtadvisor

This can be a complicated area and will depend on what type of trust has been set up have a look at the technical manual for further advice http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter31/part5/part3/part_3.htm

The OR will request a copy of the trust deed to establish if the bankrupt has an interest in the trust at that time. It is possible that the OR establishes the trust is a long term asset to be realised at a later date.

You will need to know what type of trust it is and then seek specialist advice on the matter

antrobus

maxmycardagain wrote: »

A fellow of 21 is left £50,000 in a will (cash) but cant have it till he is 25, but is looking at bankruptcy owing about £13,000....he isnt working

Obviously he cant pay his debts cos he has no money

What happens with his bequest, does the IS keep him BR till he gets his bequest and then he can pay them and get the BR anulled?

Depends on what exactly it says in the will.

Normally, when a bequest is made in a will to X with a direction that it is not paid to X until the age of 25 (for example), that creates a bare trust in favour of X. X can break that trust at any time; ergo the OR can break that trust, should X go bankrupt.

National_Debtline

Hello there. This is what I've found found for you so far (taken from the Insolvency Service technical manual):

31.5.49 A contingent interest in a trust
A beneficiary’s interest in a trust is said to be a contingent interest if it is dependent upon a certain event arising. For example, the beneficiary receives an income when he/she starts a university degree course and continues to receive the income until he/she obtains their degree. The trustee in bankruptcy would have an interest in the trust if the event triggering the trust payments occurred before the date of discharge.

What I'm less sure about is whether the official receiver/trustee can suspend the discharge until the trust is realised. Generally, discharge is suspended where the bankrupt has not cooperated, I've not found out a definitive answer at this point. I'm going to have a good hunt for you today, though.

Also, it would be important to check the terms of the trust, it would be worth seeking legal advice on this one.

The alternative option is to negotiate token payments with the creditors with a view to offering a full & final settlement once the money has been paid.

I'll post back once I've found some more information for you.

Best wishes,

David @ NDL.

maxmycardagain

The executors are a firm of solicitors, thats about as much as he knows at the moment

magpiecottage

It does very much depend on the terms of the trust. As antrobus says, if the bankrupt is the sole possible beneficiary then he can wind it up immediately and the OR will be able to force the issue.

However, it is possible to set up a trust with a contingency so that the primary beneficiary cannot wind the trust up unilaterally.

If the executors are solicitors, they should know this.

maxmycardagain

Executors believe the will allows them to do what they consider best so he may get the £40K early if no-one objects (the other beneficiaries)

roger196

If the beneficiary is entitled to the money at 25, that expectation can be sold ( usualy at auction) when someone takes a bet on the individual surviving to 25. The will may be written so that he forfeits his inheritance on bankruptcy or that the payment is discretionary at the whim of the trustees.
More facts need to be known. Were the solicitors who draw up the will aware of the spending habits of the individual. If so , they should have included a forfeiture clause and one to prevent the expectation being sold.