How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Roger Your Own Question
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 30903
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
Type Your Bankruptcy Law Question Here...
Roger is online now
A new question is answered every 9 seconds

Beneficiary of Living Trust

This answer was rated:

My father has a revocable living trust and he is still alive. I am about to be fired from my job and will not be able to get unemployment. As a result I won't be able to pay my credit cards (I owe $56,000). I think the only options I will have are to file for bankruptcy or not pay my creditors and let it go to collections. I don't own a home and I don't have any expensive assets.
I am worried that this will effect my Dad. Should he remove me as a beneficiary to the living trust to protect himself? If so, how much does it cost to make the beneficiary modifications to the living trust?
Also, do you recommend I file for bankruptcy or let my credit cards go to collections? I don't have any savings and I will barely have enough money to move. I will be moving in with my Dad until I can find another job.

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

Since you are not the settlor (owner) of the trust, and AS LONG AS the settlor lives through your bankruptcy, your beneficiary interest is contingent, meaning it doesn't come into your bankruptcy as property of the estate. This is so because your interest is contingent on the settlor, who can remove you as a beneficiary at any time.

In other words, this would not be an asset of your bankruptcy estate because you're not ENTITLED to the money and your dad (settlor) could remove you anytime. However, if he were to die, the revocable trust becomes irrevocable and you would then have a vested interest in the trust property - - which would become an asset of the estate.

Thus, it is not necessary for you to be removed as beneficiary to keep the trust from being included as an asset in the bankruptcy - - as long as your father doesn't die during the bankruptcy.

Hi - please let me know if you have any additional questions or if you need any additional information.
Customer: replied 3 years ago.
Hello Kirk,
Thank you for answering my question. However, this isn't much more information than what was posted for free on the website. I definitely would like to pay for the answer, but could you answer the entire question?
All the best,
Hi Regina -

I'm sorry, but I think I got so caught up in the trust issue, I overlooked the other issues. Hopefully, the trust issue is covered in terms of it not being part of the bankruptcy because you don't have a vested interest. Instead, since your interest is contingent, it would not be part of your bankruptcy estate.

The only risk is if something were to happen to your father during your bankruptcy. It's unlikely, but possible nevertheless. That said, if he chooses to make a modification, it should only cost a few hundred dollars as his attorney that drafted the trust should be able to draft a simple codicil/amendment.

As for filing bankruptcy or just letting the debts go to collection, filing bankruptcy is generally the better choice. The main reason for this is that IF the debts go to collection and judgments are rendered against you, the creditors can cause you a lot of trouble - - they can garnish wages, seize property, etc. But, if you file bankruptcy, these debts will be discharged and you won't have to worry about them any longer.
Roger and other Bankruptcy Law Specialists are ready to help you