Bankruptcy and Inheritence

Robo80

Hello everyone,

This is my first post, and unfortunately in difficult circumstances.

My mother recently passed away, leaving 3 beneficiaries of her will, myself and two relatives.The estate is a house and some money.

One beneficiary has been declared bankrupt, and has debts approx. equal to what would be their inheritance.

Do I go directly to the trustees, and they take over the administration of the estate? Or do I just need to inform them and carry on the probate?

And my main concern, is the inheritance of the other two beneficiaries placed at risk by the other family members bankruptcy?

Any advice or experiences would be gratefully received.

antrobus

Robo80 wrote: »

...Do I go directly to the trustees, and they take over the administration of the estate? Or do I just need to inform them and carry on the probate?....

Simply inform them and carry on.

Robo80 wrote: »

..And my main concern, is the inheritance of the other two beneficiaries placed at risk by the other family members bankruptcy? ....

Absolutely not.

debt_doctor

I presume that the person who has been declared bankrupt, is still an un-discharged bankrupt?


DD

Robo80

Thanks for the replies.

As far as I know he is still undischarged.

It's been suggested that we delay the house sale.

As far as I can see this situation is black and white, he was bankrupt at the time of the death, so even if the house is sold after the bankruptcy is discharged, he is still liable to pay his creditors from any inheritance he gets.

If I knowingly share out the estate with a bankrupt beneficiary, are all the executors liable to be pursued by the creditors?

Don't get me wrong here, I'm going to do it by the book. I just want clarification so I can let the bankrupt person know the true situation. Thanks again.

woodformoretrees

The delay wouldn't make a difference. It's the date of death, not the date of sale that applies.
I think contacting the OR would be a very good first port of call. I'd assume that the BR's share would go directly to the OR and not to the BR. But their bankruptcy definitely won't affect the other beneficiaries.

antrobus

Robo80 wrote: »

Thanks for the replies.

As far as I know he is still undischarged.

It's been suggested that we delay the house sale.

As far as I can see this situation is black and white, he was bankrupt at the time of the death, so even if the house is sold after the bankruptcy is discharged, he is still liable to pay his creditors from any inheritance he gets.

If I knowingly share out the estate with a bankrupt beneficiary, are all the executors liable to be pursued by the creditors?

Don't get me wrong here, I'm going to do it by the book. I just want clarification so I can let the bankrupt person know the true situation. Thanks again.

Technically speaking, I believe that the bankrupt beneficiary is required to notify the trustee of their inheritance, and that the trustee in bankruptcy then has the option of notifying the bankrupt that they intend claiming the inheritance. Hence the advice appears to be:-

Where the personal representatives (that's you) are aware that the beneficiary became bankrupt before the time of the deceased's death, they can, before making any distribution to the bankrupt, properly insist on seeing the notice regarding the after-acquired property constituted by the interest in the deceased's estate which the bankrupt is required by section 333(2) of the Insolvency Act 1986 to give to the trustee in bankruptcy.

Having been provided with such notice, the personal representatives would then need to confirm with the trustee in bankruptcy whether the trustee in bankruptcy had served a notice on the bankrupt under section 307(1) of the Insolvency Act 1986, or intended to serve such a notice. (to claim the inheritance for the benefit of creditors.)

If the trustee in bankruptcy had served a section 307(1) notice, or intended to do so and did so, within the time allowed, then the personal representatives could properly distribute the property only to the trustee in bankruptcy. The trustee in bankruptcy could then give the personal representatives a good receipt. (And 'good receipt' is what you want to protect yourself from being 'pursued by creditors')


http://www.lawsociety.org.uk/advice/practice-notes/bankrupt-beneficiaries/#bb22

Robo80

All sounds daunting, but hopefully manageable. Thanks for taking the time to answer.