QLD Inheritance in bankruptcy once removed

[Bernster]

My husband is currently a bankrupt. His mother changed her will prior to him becoming bankrupt, disinheriting him in favour of his son (her grandson, my stepson). My mother in law has since died and my stepson is due to inherit. If he transfers any money to me (not my husband) could that be viewed by the trustee as concealing assets etc.

 

[Bald1974]

Hi,

it should be fine because your financial or money has nothing to do with your husband’s bankruptcy.

 

[Tim W]

My husband is currently a bankrupt. His mother changed her will prior to him becoming bankrupt, disinheriting him in favour of his son (her grandson, my stepson). My mother in law has since died and my stepson is due to inherit. If he transfers any money to me (not my husband) could that be viewed by the trustee as concealing assets etc.

Depends. For example, is your stepson an adult?
This situation can unfold quite differently if your stepson is, say,
aged 35 and a reasonably sophisticated adult, or, say,
aged 10, with no real idea what's going on.
In the latter case, the Trustee may well think that the bankrupt is
using the child as camouflage to evade the Trustee.
Proof that it is otherwise will lie with the bankrupt.

Mostly, subject to certain ifs and buts,
a person can make a testamentary gift, of whatever they want,
to whomever they want.
A testator is not obliged to, say, leave money to a bankrupt in order to (help) pay that bankrupt's debts.
Indeed, it is not all that uncommon these days for testamentary gifts to be
conditional upon a beneficiary not being a bankrupt.

It's also not all that uncommon for a testator to bypass a... wayward*... grown child
in favour of (so to speak) "looking after" a grandchild/ grandchildren.
This is something a testator can do as of right, and they do not need to justify it.

That being said, an aspiring beneficiary - such as bankrupt adult son - might make a thing called a "Family Provision Claim".
This is an application brought where that applicant thinks, and can show (which is not at all easy),
that they have some sort of claim on the estate in terms of support or avoiding hardship.
You'll need formal legal advice about this in your case.

The main game is to be certain that the will is valid.
If it isn't, then the intestacy rules will automatically apply, and your husband may inherit that way.
That might put the inherited money (or assets) within the reach of the Trustee.
If you already have a Grant of Probate, then you're already OK with this aspect.
If not, then get to it, without further delay.

Once the money is in in your stepson's hands, "free and clear" so to speak,
then it's his to spend, invest, or gift, however he wants.
This can certainly include giving some of it to you, if he chooses to.
He is not obliged, legally, morally, ethically, or culturally, to help out his father at any point.

---------------------------------------
* By "wayward", I mean any or all of, but not only,
bankrupt, convicted of something, addicted, ill in some relevant way, or,
simply in the testator's opinion, "not very good with money"

 

[Bernster]

Depends. For example, is your stepson an adult?
This situation can unfold quite differently if your stepson is, say,
aged 35 and a reasonably sophisticated adult, or, say,
aged 10, with no real idea what's going on.
In the latter case, the Trustee may well think that the bankrupt is
using the child as camouflage to evade the Trustee.
Proof that it is otherwise will lie with the bankrupt.

Mostly, subject to certain ifs and buts,
a person can make a testamentary gift, of whatever they want,
to whomever they want.
A testator is not obliged to, say, leave money to a bankrupt in order to (help) pay that bankrupt's debts.
Indeed, it is not all that uncommon these days for testamentary gifts to be
conditional upon a beneficiary not being a bankrupt.

It's also not all that uncommon for a testator to bypass a... wayward*... grown child
in favour of (so to speak) "looking after" a grandchild/ grandchildren.
This is something a testator can do as of right, and they do not need to justify it.

That being said, an aspiring beneficiary - such as bankrupt adult son - might make a thing called a "Family Provision Claim".
This is an application brought where that applicant thinks, and can show (which is not at all easy),
that they have some sort of claim on the estate in terms of support or avoiding hardship.
You'll need formal legal advice about this in your case.

The main game is to be certain that the will is valid.
If it isn't, then the intestacy rules will automatically apply, and your husband may inherit that way.
That might put the inherited money (or assets) within the reach of the Trustee.
If you already have a Grant of Probate, then you're already OK with this aspect.
If not, then get to it, without further delay.

Once the money is in in your stepson's hands, "free and clear" so to speak,
then it's his to spend, invest, or gift, however he wants.
This can certainly include giving some of it to you, if he chooses to.
He is not obliged, legally, morally, ethically, or culturally, to help out his father at any point.

---------------------------------------
* By "wayward", I mean any or all of, but not only,
bankrupt, convicted of something, addicted, ill in some relevant way, or,
simply in the testator's opinion, "not very good with money"

Thank you Tim. My stepson is an adult. His father does not expect to benefit from his son's inheritance and understands his mother's decision, but he does not want me (if his son gifts some/all of it to me) to be "penalised" by his bankruptcy if it could be taken by the bankruptcy trustee. I wonder if it would be safer for my stepson to put it directly to my super rather than my bank account? My intention would be to put any cash into super anyway.

 

[Tim W]

Trustees are well aware of the petty devices that people use to try and evade them.

One of those devices, not at all new or uncommon, is for a grandparent
to make a change to their will (sometimes late in life),
purportedly by-passing the bankrupt son, to the seeming the benefit of grandchild,
but with the bankrupt as the one who really controls the testamentary corpus.

Now, understand that yes, Grandma (assuming capacity and freedom from influence)
can indeed choose of her own motion* to provide in her will for her grandchild ahead of her bankrupt son.
Her money and assets are hers to gift pretty much however she wants.
Unless she's a party to the deceased's debts herself (co-borrower, guarantor, etc)
then she herself has no obligations to the Trustee, nor the creditors, nor do they have any claim on her.

But if I'm the son's Trustee in Bankruptcy, and the estate is large enough
(say, a residential house with a market value of a low six figures...)
then you bet I'll want to test the genuineness of this arrangement.
And yes, that can include disputing the will.
And yes, potentially, a claw back of money or assets.

Look, what you have here might well be a bona fide, fully considered, properly advised, and correctly set up,
action by Grandma.
What will be fatal to the validity of her will however, will be any evidence that she was
influenced by the son to arrange her affairs to evade his Trustee.

I strongly recommend that you get the fully thought out, case specific, advice
of a specialist estate and succession solicitor.
Which does not have to be the one handling the estate, nor your husband's existing solicitor.


-----------------------------------
* "Of their own motion" is lawyer-speak for when somebody chooses to do something, and
it's all their own idea, in their own time, without influence or obligation,
and happens according to any conditions, ifs, and buts, that they choose.

 

[Bernster]

Trustees are well aware of the petty devices that people use to try and evade them.

One of those devices, not at all new or uncommon, is for a grandparent
to make a change to their will (sometimes late in life),
purportedly by-passing the bankrupt son, to the seeming the benefit of grandchild,
but with the bankrupt as the one who really controls the testamentary corpus.

Now, understand that yes, Grandma (assuming capacity and freedom from influence)
can indeed choose of her own motion* to provide in her will for her grandchild ahead of her bankrupt son.
Her money and assets are hers to gift pretty much however she wants.
Unless she's a party to the deceased's debts herself (co-borrower, guarantor, etc)
then she herself has no obligations to the Trustee, nor the creditors, nor do they have any claim on her.

But if I'm the son's Trustee in Bankruptcy, and the estate is large enough
(say, a residential house with a market value of a low six figures...)
then you bet I'll want to test the genuineness of this arrangement.
And yes, that can include disputing the will.
And yes, potentially, a claw back of money or assets.

Look, what you have here might well be a bona fide, fully considered, properly advised, and correctly set up,
action by Grandma.
What will be fatal to the validity of her will however, will be any evidence that she was
influenced by the son to arrange her affairs to evade his Trustee.

I strongly recommend that you get the fully thought out, case specific, advice
of a specialist estate and succession solicitor.
Which does not have to be the one handling the estate, nor your husband's existing solicitor.


-----------------------------------
* "Of their own motion" is lawyer-speak for when somebody chooses to do something, and
it's all their own idea, in their own time, without influence or obligation,
and happens according to any conditions, ifs, and buts, that they choose.

thank you again Tim. I will seek formal legal advice.