Trust /trustee bankruptcy

Discussion in 'Estate Planning, Creating Wills & Trusts' started by legalq, Jul 4, 2011.

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  1. legalq

    legalq Law Topic Starter New Member

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    I am the successor trustee of a living trust that is to become irrevocable within the next month. When the trust becomes irrevocable I will become trustee over my mother and my parents “family” trust. I am unmarried and have no issue. I may predecease my mother and it has been suggested that I have a living trust set up so that should I predecease my Mother that my share of the inheritance go to “my” trust upon my mothers death and in that way I could delegate where and to whom my share would go.

    I may have to go bankrupt within the next year. (personal bankruptcy)

    The family trust has a spendthrift clause is in it. I would be listed in the family trust as a beneficiary and “my” trust listed as the next in line for my share should I predecease my mother. There Are other beneficiaries of the trust

    My Questions:

    Will my having my own living trust that will be listed in the Family trust allow any creditor to attach the family trust.
    Will my ability to receive income as the trustee cause any problems with any attachment to the family trust (I will be well under the income limits of the bankruptcy guidelines)

    Will having “my own” living trust valued at under say $300 dollars (because I have to fund the living trust in order for it to be created right?) cause problems in my personal bankruptcy.
     
  2. Michael M. Wechsler

    Michael M. Wechsler Administrator Staff Member

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    You have a very complex question that can only be answered properly with a consultation with a bankruptcy attorney. Typically these questions are answered by state law and whether there is a spendthrift clause enforceable under state law. As you are a debtor who is also a trustee of a trust, 11 U.S.C. § 541(a) may apply. In short, the bankruptcy court bankruptcy estate trustee's powers granted under the trust instrument are included. This doesn't mean that the assets are subject to the bankruptcy. This is a complex question and will involve proper financial planning if declaring bankruptcy may be an option in the near future.
     
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