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Alex J.
Alex J., Solicitor
Category: UK Bankruptcy Law
Satisfied Customers: 2527
Experience:  2 Years Insolvency Litigation
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Hi, My cousin has been hit with a massive VAT bill, can she

Customer Question

Hi,
My cousin has been hit with a massive VAT bill, can she sign over her house and belongings to her husband and declare herself bankrupt ?
Submitted: 1 year ago.
Category: UK Bankruptcy Law
Expert:  Alex J. replied 1 year ago.
Hi

Thank you for your question and welcome to Just Answer.

Does her husband own the home jointly with her?

Are her belongings particularly valuable?

Kind regards

AJ
Customer: replied 1 year ago.

no she is the owner,


Not particularly some are but not many

Expert:  Alex J. replied 1 year ago.
Hi,

Thank you.

She could transfer her property to her husband but would have to wait two years before going bankrupt.

There is a specific section under the insolvency act the prevents people dissipating their assets under the Insolvency Act 1986 S.339. It is known as a transaction at an undervalue and her trustee would be able to look back two years prior to the date of her bankruptcy and potentially un wind such a transfer.

Is there any equity on the property?

Kind regards

AJ
Customer: replied 1 year ago.

they own it outright

Customer: replied 1 year ago.

they own it outright, could he sign an affidavit saying all the house contents are his …?

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

Yes she could do that but ultimately if her trustee can prove they actually belonged to her and were disposed of to avoid her creditors he will be able to challenge it.

Any transaction deliberate designed to avoid ones creditors may be subject to a challenge.

Kind regards

AJ
Customer: replied 1 year ago.

she was also residuary recipient of my uncles will but that was changed to favour her children, would they also be able to reverse that ?

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

If your uncle made that decision then no they won't be able to challange it.

Kind regards

AJ
Customer: replied 1 year ago.

Nope she was thinking of making the change the uncle died some 6 months ago and the will is still in probate

Customer: replied 1 year ago.

No she was thinking of making that change, she has not begun to talk to HMRC yet but wanted to make the change incase things go a bit wrong… she may not go bankrupt but I guess she is afraid it may go that way, my original question was to highlight the situation, she has yet to receive a bill and probably won't do for a couple of months and it may be a small one...

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

Without probate being granted it is hard to say what disclaiming her right in the will would so. As a starting point the executes would have to agree that the residue could go to her kids directly.

She would have to speak to the executors.

If she runs her own business then bankruptcy should be avoided where possible. As she has her own house that could be offered as valuable security in return for forbearance on the debt and time to repay.

Kind regards

AJ
Customer: replied 1 year ago.

Probate has been granted, however the uncles house is 50% owned by a finance company and needs to be sold to release funds, a change in the will would be to determine the recipient of that residuary amount.

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

The executors will still have to agree to it. Otherwise all that will happen is the money will go to her and then be gifted to her kids which the trustee could definitely challenge.

Are her kids beneficiaries under the will?

Kind regards

AJ
Customer: replied 1 year ago.

yes they are, they get 5,000 each currently


her husband get some furnishings, she was going to make a change to give everything to them.


HMRC have not currently made a claim against her and it is by no means certain that the bill will be large or unaffordable.


 

Expert:  Alex J. replied 1 year ago.
Hi,

Thank you.

If it is only her and her children that get the residue of the estate and she gives up her entitlement then by definition the residue as it is will go to the kids.

If she wants to disclaim her interest then she will have to do it before bankruptcy and she will need to check in the will when probate is granted whether this is possible. If the executors are friendly they should be able to assist with this.

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 1 year ago.

Would this not be counted as trying to get away from your creditors ?
I thought this could be reversed in court ?

 

Or are you say that simply writing yourself out of the will is not something that can be disallowed and therefore by default you cannot challenge the kids getting the money… ?

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

She is not bankrupt yet and giving up rights to an inheritance is not an asset per say.

Also is she disinherits herself before bankruptcy the trustee is never going to know as she will no longer have any rights to that inheritance.

I would strongly recommend that you get the will before doing this.

Kind regards

AJ
Customer: replied 1 year ago.

Hi what do you mean "Get the Will"
she has a copy, Probate has been granted but an adjustment can be made.
So with no real debts you can disinherit yourself and that can't be reversed ?


If so that seems to be the obvious answer… her solicitor said that it could be defrauding her creditors but since she does not want to go bankrupt and no VAT bill has been Raised I don't see how that could be so…
But obviously she needs to be sure…
Could she make an alteration to give her a smaller amount or should she completely disinherit herself ?

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

To disinherit oneself you just need go send a notice to the executors in writing.

How much is she actually going to be disinheriting?

Kind regards

AJ
Customer: replied 1 year ago.
About 35,000
Customer: replied 1 year ago.
About 35,000
She is one of the executors the other are the family solicitors
Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

Because she is an executor and probate has been granted it increases the chances of any future trustee in bankruptcy finding out.

You have to remember the will is a public document therefore her trustees in bankruptcy could easily find out what she has done.

My concern is if she disinherits herself an then goes bankrupt within the next 12 months it may cause the trustees to review the arrangement and try and claw back the money from her children if it does go to them.

On the one hand she has nothing to lose as trustees would get their hands on this money regardless of whether she disinherits herself or not, however it may be worth considering whether she can agree a payment plan with HMRC first.

Kind regards

AJ
Customer: replied 1 year ago.
She has had an exceptionally stressful 10 years the last 6 very stressful with her daughter have mental health issues possibly they take things like that into account.
She is quite relieved they have contacted her so maybe it will be alright.
Her business has done very well the last 2 years before that they lived hand to mouth, they claimed no benefits when they might have.
Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

If her business is improving and she has a house as good security she might be able to offer them security in return for a repayment plan.

Until she knows exactly what HMRC will do it is hard plan.

Why doesn't she use the inheritance to pay HMRC? At least she would then get to keep the house clear and free?

Kind regards

AJ
Customer: replied 1 year ago.
She rents and has no assets but business is booming
Customer: replied 1 year ago.

She is renting and has few assets She was a sole trader but just set up a LTD company.

If she just reduces what she gets but keeps a substantial proportion that would increase the trustees finding out, however as yet no bankruptcy has started...

Surely if you don't tell the trustees about the inheritance how will they find out ?

Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

The trustee could potentially find out as the will is a public document.

If she starts a limited company she will still have the VAT liability in her personal name.

She doesn't own her own home then?

Kind regards

AJ
Customer: replied 1 year ago.
No she doesn't own
Expert:  Alex J. replied 1 year ago.
Hi

Thank you.

The botXXXXX XXXXXne is if she goes bankrupt the trustee will be able to review any transactions that she has entered into where she has deliberately dissipated her assets to avoid creditors.

There is no specific way to avoid it other than avoiding going bankrupt for at least two years after enter into the transaction.

Kind regards

AJ
Customer: replied 1 year ago.

Her only creditor is the revenue, possibly if she just adjusts the will a little leaving herself as the main beneficiary that will not be seen as an attempt to avoid anything.

Since her husband would be the main recipient he could pay the rent and she could pay back hmrc with the business proceeds.

Expert:  Alex J. replied 1 year ago.
Hi

Thank you

Yes she could do that but if she goes bankrupt in the next two years then there is still a risk that the transaction could be challenged.

Her husband can take over the lease as it is a liability but the landlord will have to agree to this.

Your cousin should start negotiations with HMRC as soon as possible.

Kind regards

AJ

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