Treatment of an inheritance in bankruptcy depends on the value of the asset given to you and when you receive it. You won't always know when you are going to receive inheritance but nonetheless need to consider the potential issue and properly plan in order to minimize the risk of losing this type of asset. Depending on when you expect to receive inheritance, and how much you expect to receive, you may also need to time your filing accordingly, or you may not be able to file. If filing could potentially place your assets in jeopardy, an experienced attorney can discuss your other options with you.
What Happens to My Inheritance in Bankruptcy in San Diego?
When you acquire money or property through inheritance, the item becomes one of your assets. If the asset is money, it is typically deposited into one of your bank account and is treated just as any other bank account funds are treated in bankruptcy. If the asset is a home or other parcel of real estate, then the moment you are put on title to the property it becomes one of your assets. In addition, once you acquire a right to inheritance where someone has died, that right to acquire inheritance is also treated as one of your assets. Inheritance is one of the most overlooked types of assets in a Chapter 7 or Chapter 13 filing. If you have a loved one who is in poor health, it is essential that you consider the potential for receiving an inheritance and understand how this type of asset is treated in bankruptcy in San Diego.
Inheritance Before Bankruptcy
Money or property acquired by way of inheritance before bankruptcy, then the money or property is treated just like any other asset. To determine whether the item acquired through inheritance will be property you keep in bankruptcy San Diego, you will have to assess the value of the equity in the property or asset. If the equity property or other asset is covered by your applicable exemptions, you’ll get to keep it. Otherwise, the trustee who is analyzing and reviewing your case will take control of the asset, sell it, and use the money to pay your creditors.
Inheritance After Bankruptcy
If you acquire or become entitled to receive any property, money or other asset by way of an inheritance within 180 days after your bankruptcy filing date, then the property, money or other asset becomes part of your bankruptcy estate and is treated as if you had the money or other asset on the day that you filed. For example, if you are a beneficiary entitled to receive a home or parcel of real estate under a will and the person who willed the home to you dies 179 days after you file, then the real estate is treated as though you owned it on the day you filed. If the equity in the real estate is covered by your applicable exemptions, you’ll keep it. Otherwise, the trustee can and will liquidate (sell) it and use the sale proceeds to pay your creditors.
If More Than 180 Days Have Passed
If you obtain or acquire the right to obtain (meaning somebody has passed away) money, property, or other assets through inheritance more than 180 days after your filing, then the assets are not part of bankruptcy estate. Otherwise stated, if more than 180 days have gone by and you acquire an asset (or acquire the right to obtain an asset) through inheritance, then you get to keep it and the trustee has no claim to it.
Part of the bankruptcy planning process may involve taking appropriate steps to reduce the risk of placing your inheritance at risk of being forfeited. For example, if you expect inheritance from someone who is ill and may soon pass on, you should discuss this with your attorney. If you are entitled to receive an inheritance and you need to file bankruptcy to get out of debt San Diego, talk to an experienced lawyer as soon as possible to protect your interests. Depending upon the circumstances, your attorney may recommend that you accelerate your filing to reduce the possibility that you will receive an inheritance within 180 days after your case is filed.
Duty to Inform the Trustee
If you receive any property or other asset through inheritance within 180 days after you file bankruptcy, you have a duty to inform the trustee who was handling your case, even if your case has been closed. In practice, you would tell your lawyer, and your lawyer would relay the information to the trustee.