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Legal Gurus: Legal use of Spendthrift clause in pre-BK 7 plan for medical BK.


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Legal Gurus:  Legal use of Spendthrift clause in pre-BK 7 plan for medical BK.
 
Sometimes in your life you go through a a rough time.  This is an entire rough season. 
 
Besides myself, I have no less that 3 brothers, sisters, and loved ones going through very serious medical crises heart surgery, MS, breast cancer etc.  - they are not well off and since 60% of all BK are medical even for those who have insurance. There is a very good chance that they may be forced to file bk 7 in the future because of medical.  In other words I may be the first 
in my family forced to file medically related bk 7, but not the last. 
 

I talked with my parent who is elderly, about a smart legal pre- bk7 estate planning 

tool called a spendthrift clause and updating the will with this clause to protect passing on the family farm to all my siblings in accordance to their wishes in the event any of us have to file medical bk 7.     
 
INTENDED RESULT:  To protect my whole family including myself
 
How do we add this to his estate will so that it is rock solid and protect all
my siblings and myself in case of medical bk 7 even if we live in different states?  
 
QUESTIONS:  
 
1) Does this spendthrift clause actually protect  if in place before any of us file bk7 ?    Are there any Gotchas? 
 
2) Can one clause be used for all siblings or does it have to be written separately for each?
 
3) If we are in different states from my parent, what do you do so the clause is legal in both theirs and ours? 
 
4) My parent is willing to look into with his lawyer but what exactly is it that we need to ask them to tell their lawyer to insert and when does it need to be done? 
 
5) Anything else we should know? 
 
Thank you so much for your valuable time, wisdom, advice, and hope.
 
 
P.S.   I have done my best homework FIRST to show respect for your valuable time. 
I have included some examples of supporting research below to help illustrate my questions
 
 
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SPENDTHRIFT CLAUSE RESEARCH:
 

60% of all Bankruptcies are medically related. And that is those that have insurance!  

After a long battle, which I took all the way to the att. gen office, I may have to declare Bankruptcy in the near future. But I may not be the only one.  Who knows what lies ahead medically for our brothers, sisters, loved ones, etc. who are going though severe medical crises  even with insurance? This is one way to protect everyone. however, For it to protect, it has to be in place legally before anyone files BK 7 as i understand it. 

 

 

Q 1 ) What happens if I inherit something after filing for a Chapter 7 bankruptcy?

 

1.   If a debtor inherits money or property within 180 days (or 6 months) after filing, these assets automatically become part of the debtor's estate and can be seized, liquidated and distributed to creditors. Which defeats the whole purpose of filing bankruptcy.

 it if is within 180 days of you filing a Chapter 7 bankruptcy, any inheritance or life insurance that you receive will come under the control of the Chapter 7 trustee and will be used to pay your creditors.  you should discuss the situation with your attorney.

 

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3.   In a Chapter 7 case, an inheritance received within 180 days after you file for bankruptcy becomes part of your bankruptcy estate, the trustee can take it to distribute to your creditors.

 

4.   An inheritance the debtor acquired before the bankruptcy case was filed or within 180 days after the bankruptcy case starts is considered part of the bankruptcy estate, according to 11 U.S.C. §541(a)(5)(A). If the inheritance is determined to be part of the bankruptcy estate, the trustee may demand all or any portion of the inheritance that is not subject to an exemption.

 

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Q: 2)  HOW CAN I LEGALLY PROTECT A POSSIBLE INHERITANCE IN SMART PRE - BANKRUPTCY PLANNING?

 
1.   A careful estate planning attorney may anticipate a bankruptcy with the creation of a spendthrift trust, rather than a complete disinheritance. The will could even provide that in the event the beneficiary has filed a bankruptcy petition within six months (180 Days), the outright distribution shall not be made, but instead shall pass to a trustee of a spendrift trust, perhaps for distribution outside the 180 days.

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2. Spendthrift Trust

When a debtor cannot claim the inheritance as exempt, receiving the inheritance through a spendthrift trust is another way to protect her assets. If a beneficial interest is transferred to the debtor through a trust, that interest is not considered part of the bankruptcy estate, according to 11 U.S.C. §541©(2). Since the asset received through the trust is not part of the bankruptcy estate, the bankruptcy trustee cannot demand that the debtor use the interest in the trust to pay creditors. The spendthrift trust must be valid and enforceable under state law in order for section 541©(2) to be applicable.

3.  Bankruptcy attorneys sometimes advise debtors to request family members to change their Wills to avoid any outright distributions to them during the 180 days. This can be an embarrassing and delicate task.  A spendthrift trust is one way.

 

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ONE SAMPLE OF WORDING IN SPENDTHRIFT TRUSTS TO PROTECT AGAINST BANKRUPTCY:

"Regardless of anything herein to the contrary, in the event that any beneficiary of an outright distribution or from a trust shall have filed a petition for bankruptcy during the period beginning 181 days prior to my passing, and extending to the day after my passing, then such beneficiary shall not be entitled to any distribution.

"In such event, the distribution shall instead be held by my trustee for the benefit of such beneficiary, and the income and principal therefrom shall be distributed to such beneficiary in the sole and absolute discretion of my trustee at a time no later than 180 days following my passing or if such beneficiary survives me.

 
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Just an update of what my research has shown so far,  I really welcome new input and info thanks! 

 

1) There is nothing more important than a competent Multi-state estate attorney specialized in an asset protection.any spendthrift clause would have to be airtight in all states involved so that it cannot be pierced or thrown out by the trustee in the BK 7 state or the estate state.  

New Questions:

1) If you actually do have this legally COMPETENTLY in place before you file bk, then you don't have anything coming to you anyway during the entire procedure, so what would you legally declare?

2) Can this be put in place once, to protect all siblings? 


Thanks for your patience and wisdom for a curious mind and here is the hope this deep dig benefits many ! ; )

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Thanks!  My point is this specifically:

 

 

QUESTIONS:  
 
1) Does this spendthrift clause actually protect  if in place before any of us file bk7 ?    Are there any Gotchas? 
 
2) Can one clause be used for all siblings or does it have to be written separately for each?
 
3) If we are in different states from my parent, what do you do so the clause is legal in both theirs and ours? 
 
4) My parent is willing to look into with his lawyer but what exactly is it that we need to ask them to tell their lawyer to insert and when does it need to be done? 
 
5) Anything else I should know? 
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