Central District Consumer Bankruptcy Attorney's Association

Is this the father's trust or is this a trust someone else
established with the father as a beneficiary? Assuming it is the
father's trust, and this secured creditor of the debtor's is acting
as trustee of the father's trust, the question becomes is the trust
revocable or not? If the father can make changes including to
beneficiaries, then the trust is revocable and the bankruptcy estate
has no interest in it unless of course father dies within 6 months of
the petition being filed. On the other hand if the trust's terms are
set in stone and the father or whomever estatblished the trust cannot
make changes, it is an irrevocable trust. As such the debtor and
thus the bankruptcy estate has an interest as a residual beneficiary,
conditional upon the debtor surviving the father. That interest
should be listed in Schedule B.
If the trust is irrevocable and has a spendthrift clause relating to
the debtor's right to receive a distribution at the father's death,
then although an asset of the bankruptcy estate, theoretcally, the
spendthrift clause may serve to prevent or minimize any distributions
that would otherwise go to the bankruptcy estate.
Mark Jessee

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My client will inherit money someday IF her father dies. He has a
spendthrift trust. Since her father is not deceased (a decedent) I
did not think at the time of filing that it should be listed under
Schedule B #19. The father is young (in his 50's).
A secured creditor who also manages the father's trust thinks the
interest should be listed. At the 341a hearing, the debtor said that
she would receive money when her father dies. But that she is not
able to get money now or else she would not be filing bankruptcy.
The secured creditor also wrote to the trustee and I think he spoke
to the trustee. I encouraged him to do so if he had any questions or
concerns. I also called the Chapter 7 trustee's office and they did
not see a question of an asset. So, now that the case has been
discharged, the secured creditor handling the father's trust is
saying that if the father dies the debtor will not be able to
inherit. He wants something is writing to show that the trust money
was not an asset. The trustee will probably not provide a letter
saying this so I am asking for any suggestions. I will get a copy of
the tape of the 341a hearing but I don't think that will satisfy this
attorney.
Thanks.
Margaret Hew

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