WA Negotiating with Bankruptcy Trustees?

[Chelle Mitchell]

I am half way through a personal bankruptcy that resulted from my company going into liquidation. I worked really hard for over three decades. My dad has passed and potentially left me around $300,000.

In the will which was made over 10 years ago when we were estranged, he has included a clause that says - If I choose to refuse my inheritance it will be divided equally between my now ex wife and two children. So I can accept the inheritance and it will all be taken by my Trustees or I can invoke the clause and refuse it and my Trustee and therefore creditors will get nothing.

My question is - Can I approach my Trustee and offer to accept my inheritance if they will allow me to keep say 25% of it? The balance would then go to my creditors which would give them around 60 cents in the dollar back. I am nearing 63 and have absolutely nothing left and this would give me something for my retirement. Is it legal to offer such a deal? Would I need legal representation? I want my creditors to get something and sincerely wish it was the full amount but at my age I have to try and do something for myself as well.

Any feedback would be helpful.

 

[Rob Legat - SBPL]

I haven’t looked at this issue in some time, but my understanding is that you don’t have the right to make an election about the benefit under the estate - it automatically belongs to your trustee.

 

[Chelle Mitchell]

I haven’t looked at this issue in some time, but my understanding is that you don’t have the right to make an election about the benefit under the estate - it automatically belongs to your trustee.

Does the specific clause not give me the right? I am not inheriting and then forwarding it. Under this clause I would not be a beneficiary at all. I thought wills had to be carried out to the letter in regards to how the clauses are stated?

 

[Rob Legat - SBPL]

I would think it's more the case that the bankruptcy trustee is the one who gets to make the election instead of you.

In law, the right of someone to make a decision which they can enforce legally is called a 'chose in action' - it's a thing which they don't presently have, but have the right to obtain it by 'action' (e.g court proceedings). When your father passed away, the terms of the will kick in and the beneficiaries' 'mere expectancies' become actual rights in the estate. Those beneficiary rights are choses in action under the law.

Under the bankruptcy law, a chose in action for part of the property of bankrupt which vests in the trustee. In this case, it would be after acquired property.

So, effectively, the right to make the decision on whether or not you disclaim you inheritance under the will is not yours - it vests in the trustee. Both you and the executors of the estate can wind up in hot water if you fail to deal with it properly, as this could be seen as an attempt to defraud your creditors.