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Protection of Inheritance
A person with creditor problems or a money judgment against himself may feel “lucky” if a relative dies and leaves him an inheritance. Yet, the inheritance is an asset as soon as it is determined by a court, or pursuant to a living trust, that the debtor has a beneficial interest. If money is distributed from the decedent to the beneficiary the money is even more accessible to creditors. If the debtor accepts the inheritance and then transfers the money to another non-debtor family member or to a protected asset, such as an annuity, that transfer will be attacked as a fraudulent conveyance subject to reversal. The best situation would be if the decedent had made a bequest to his heirs or beneficiaries in a trust for their benefit rather than outright distributions, assuming the trust document had proper spendthrift language to provide creditor insulation. Unfortunately, the decedent himself usually does not have asset protection concerns at the time the testamentary will or trust is created, and protection of the inheritance from the creditors of one or more of his heirs is not an important estate planning motive.
One of the most important tools of asset protection planning is involving parents or grandparents in your asset protection plan by encouraging them to leave your inheritance in protective trust. The heir with asset protection concerns must take responsibility for this part of family planning. For the heir or beneficiary, a bequest in trust with liberal distribution instructions provides nearly unrestricted use of the inheritance yet protects inheritances from judgments. If you are a judgment debtor who is faced with the prospect of an inheritance in the form of an outright bequest you may consider a “disclaimer” whereby you waive your right to the inheritance, and the inheritance automatically passes to you lineal decedents. In such case, a creditor could argue that the disclaimer was a form of fraudulent conveyance. A disclaimer would be easier to defend than a transfer of inherited money after the heir or beneficiary takes possession of an outright bequest. I am unaware of any court decisions reversing a disclaimer as a fraudulent conveyance.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
February 1, 2006 in Planning Tips | Permalink
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Comments
I am the heir to a rather large sum upon my father's death, I am planning to re-marry in May, what I would like to know is once I receive the inheritence, will my spouse be entitled to half? I honestly don't have an issue with that, the issue I have is; will his ex-wife be able to put a claim on his portion of my inheritence? If so, how can we prevent this...I have no issues sharing with him, I just don't want his ex-wife claiming that she is entitled to anything, we pay child support monthly, but she is always trying to steal from us, please let me know what I can do,thank you.
Posted by: olivia fini | Jan 2, 2007 7:26:27 PM
I have a concern on a few things relating to inheritance.My dad has a different last name then myself due to my moms lies and at 28 we did a paternity test and it revealed what we all knew i was his.Now with that said.If my dad has a large amount of liquid asset(cash in 3 banks)One was a settlement and he went to his sisters and she now is on the accts as the secondary person authorized to take cash out of the account,Am i legally allowed to freeze his assets when he dies to prevent her from taking his liquid assets from me the rightful heir to this cash flow?Can i legally freeze all land and trailors my dad owns as well ?he claims he is going to do a will to protect me so i get the assets but will a will protect me and i was only wondering due to the fact he is not on my birth certificate but i got a notorized dna test from dna diagnostics done in florida...Please tell me what my legal rights are and how to protect his things from his sister getting them ?my dad is easily manipulated i have seen in the last 2 weeks since his girlfriend died7 days ago.Please help me!
Posted by: mary mcnulty | Dec 23, 2006 2:42:20 AM
It is my understanding that each state has its own procedures for recognizing foreign judgments and the length of time that the foreign judgment remains a lien. I would expect that if the Florida Judgment had a life of twenty years, it could probably be refiled in Pennsylvania and re-established as a foreign judgment. This might affect enforcement against real property in that state, but couldn't Florida still enter a garnishment order against a national bank and collect without ever going to Pennsylvania? It's enough of a risk that I don't think we'd advise the client to move to a state with a shorter limitations period.
Posted by: Jeffrey S. Goethe | Jul 29, 2006 8:29:11 AM
A disclaimer results in the person making the disclaimer being treated as having predeceased the person who owned the asset. By definition, the person making the disclaimer cannot control where the asset passes after making the disclaimer. Therefore, the will or intestacy laws are read as if the person disclaiming had predeceased the owner of the asset. The asset then passes to the next heir or beneficiary.
Posted by: Jeffrey S. Goethe | Jul 5, 2006 7:39:18 AM
Florida has a SOL of 20years on judgements.
Could a person with a judgement in florida, move to Pensylvania with a 4yr. SOL and be free from any inheritance being taken by a judgement after 4yrs.
Posted by: fred | Jun 27, 2006 9:23:38 AM
Could you please explain this in a little more detail: "Also, the disclaimed property does not automatically pass to the lineal descendants of the person making the disclaimer. It depends upon the instrument or intestacy law creating the disclaimed interest." What are the issues that determine whether the disclaimed property goto the lineal descendants of the person making the disclaimer.
Posted by: Michael Wrighton | May 28, 2006 10:36:28 PM
A disclaimer is an interesting option, but has its limitations in this context. The use of a disclaimer is barred when the disclaimant is involvent when the disclaimer is made. (F.S. 739.402(d)). Also, the disclaimed property does not automatically pass to the lineal descendants of the person making the disclaimer. It depends upon the instrument or intestacy law creating the disclaimed interest.
Posted by: Jeffrey S. Goethe | May 10, 2006 3:47:25 PM
