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VanDLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 833
Experience:  Chapter 7 & 13
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my brother in law had a massive heart attack and has two sons

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my brother in law had a massive heart attack and has two sons with a life ins policy. he never changed the beneficiary because it was taken out years ago and left to my father in law for him to care for the children. My father in law passed. My husband and his sister would be the beneficiary's then. The problem is, my husband can't claim this because he is in a chapter 13 bankruptcy. what do we do to protect the boys interest?
Customer: replied 8 years ago.

Virginia Beach, Virginia

Already Tried:
We have done nothing yet and we are just in panic here. My brother in law is not awake and we just discovered this and my husband cannot claim this. He has a sister who would claim the whole thing. We WANT the boys interest protected.



I am sorry to hear of your family situation. However, I am not sure that you are correct in your analysis of the life insurance policy. You would need to read the policy and also talk with them regarding this, each company handles this a different way. Usually, when a beneficiary dies before the insured, and there is no contingent beneficiary named, it reverts back to the insured's Estate. In that case his spouse and children would get the proceeds from the policy.


If it is deemed that the beneficiary's Estate gets the proceeds, then your husband and his sister would inherit, as you stated. Your Husband can "disclaim" his interest, and his sister would then get all the proceeds. To disclaim it must be in writing and must done within nine months of the date of death, and no claim or use of the money must be made by the person disclaiming. Your sister-in-law would be issued the proceeds.


If the boys are minors, and they get the proceeds directly from their Father's Estate, a guardian of the property would be named by the court and the proceeds would be under court supervision until they turned 18. You could use the money but you would have to get court permission every time and have good reason for its use. You could also set up a monthly stipend to be sent every month to the boy's guardian, but again that would have to be set up through the courts. The boys would also be entitled to whatever social security survivor benefits their father had as well until they turned 18.


Customer: replied 8 years ago.
Ok, but how would this be handled by the trustee in the case of my husband, can he really Disclaim it to let my sister in law take it. Is he allowed to disclaim the money. I know you have exp in chapter 13. How would the trustee find out if the trustee was not notified.

I mean no one can make you take money, is this correct? is there anything in the bankruptcy law that talks about inheritances and if you have to turn them over.

He IS going to be dying that I do know. I myself know nothing about the life ins policy's procedures. I just know that he should not take the money even if it is going to the boys.
Customer: replied 8 years ago.

I am just sick over this whole thing. I assumed that as well that it would go to his estate because when I called last week (to the benefits office) to find out about this and found out that he named my father in law who is not alive (which I think he was the second beneficiary) because they asked me if his mother was alive and I said no, then they asked if his father was alive and I said no, then they told me it was my father in law...then I said o my! how do the boys get this, what do we do? And she said that if he has no will then they will need to go and apply for administrators of the estate. So I took it that that meant that the money went to the estate. Then my friend asked her lawyer and he says it gets paid to my father in laws descendents and that's when I FREAKED!


I absolutely do not want to call our lawyer because first of all he has not passed yet and I don't want anyone knowing about it...I'm just a wreck over it.


I guess what I'm asking is if he disclaimed it....would the trustee find out about that. I mean how would the trustee "know" to begin with, it's not that $50,000 is gonna show up in the account.


can you please answer this question before I pay the invoice, thanks



I am sorry this is so stressful for you, but completely understand. Did you tell the insurance company that your Father-in-Law had passed as well? You will get conflicting answers on this question. Some people think that if the person getting the ins. money is dead it goes to their Estate, others that it goes back into the insured's estate, and their heirs at law inherit. Don't freak by what the attorney says yet!! It may not be correct. The insurance company is going to tell you what they want to do in this situation.


So if they told you that they want to pay to the Estate of your Father-in-law ask them if that is how the check would be issued, "Estate of John Doe". Because if it is, then you will have to reopen Probate for your Father-in-law. This is not the best idea. Again, the insurance company is going to have procedures in place for this very thing.


Now both your sister-in-law and your Husband could disclaim and it would go to your brother-in-law's Estate, but that may not be the best situation as it would put the money under court supervision, and you have the Chapter 13 issue. If your sister-in-law had the money she could spend it as she saw fit, or put it into Trust for the boys. Remember she is under no legal obligation to give the boys any of it, just a moral one........


If he disclaims the Trustee would not know about it unless he told them, but he is under an obligation to tell the Trustee unless he has been discharged. Not doing so could result in dismissal of the bankruptcy, if they did ever find out. It is only his portion that would be in the bankruptcy as well, the sister's half goes to her. However, I have been looking into this and Virginia Ann. Code § 64.1-196.7. Disclaimer of interest by trustee.

If a trustee disclaims an interest in property that otherwise would have become trust property, the interest does not become trust property. This means that even if the property does become the property of your husband, and thereby the Trustee, the Trustee can disclaim. Another words, the Trustee does not have to take the money, and in this situation just may not.


To answer your question about inheritances in bankruptcy. Yes, there is clear law on this, and property that is received during a bankruptcy is subject to seizure by the Trustee. That is an easy one to answer. If your husband just received this and there wasn't the other issues he would have to turn that money over to the Trustee by law.


However, this not going to be an easy answer. You will have to talk to the insurance company and you are going to have to talk to an Probate attorney. If you don't want to talk to your banruptcy attorne yet, that is fine, but you will have to if your Husband is in anyway involved in receiving the insurance proceeds.


I still believe that the insurance money will revert back to the insured's Estate if all beneficiaries are deceased. Once he passes you will have to open Probate, a guardian of the children will be named and a Personal Representative of the Estate. You could fight the insurance company if they try and give it to your husband and sister, the Estate could make a claim. This is where talking to a Probate attorney would be helpful.


Next thing I would do is call the Insurance company and tell them all beneficiaries are dead, the family wants this to go to the insured's Estate so the children get it. (now remember if this happens the money goes into court supervision), and see what they say.



VanDLaw and 4 other Bankruptcy Law Specialists are ready to help you
Customer: replied 8 years ago.
I truly thank you for your advice and your help. No one really has spent this much time with me to help me concerning this matter. I'm not really worried about my father in laws estate because it never did go into probate. so there's nothing to open up. him and his children owned the home and it just transfered automatically when he died and they sold it, the checking account was in the dads' name and my sister in laws so that was not a problem, it just transfered and so there was no reason to go to probate according to the lawyer it was pretty cut and dry will. IF it is going to go to my father in laws estate, I can't see why my sister in law can't just "claim " it herself bypassing my husband completely without even mentioning him then it would go to her.

When I talked to the lady at the benefits office , yes she knew that both beneficiaries were deceased and that's when she said that one of the boys would have to go to court and petition for administrator of the estate. So that led me to believe that this will transfer BACK to my brother in laws estate.

One thing, I can't do anything about this at all. I cannot control what my husband does or doesn't do. I've talked to my sister in law and she is prepared to just claim it herself bypassing my husband if she has to but what we are trying to do is to let it go back to Bill's estate.

Thank you so much for your effort and time during this most difficult time.
I really hope your family gets through this and that Bill recovers. I also think it will go back to the Estate, and then you can go from there with the money that the boys will need. Take care.
Customer: replied 8 years ago.

I just wanted you to know that after a long battle with this massive heart attack he had on the 3rd of Nov he did pass on the 26th and you were correct. We had to produce proof that my father in law was deceased and then the boys claimed it since they are next of kin. My oldest nephew, his son is 26 and the youngest is 24 so they are going to be going to probate to talk to the clerk so that he can be named administrator of the estate since Bill had no Will.


I just wanted to than you for your help though with this

I am very sorry for your family's loss, I personally know how hard this is for everyone. Thank you for the follow up, I usually never know what happens in these very real situations.
Customer: replied 8 years ago.
I most certainly will call on you again if I have any other questions and will refer you to others. Thanks so much for your help during that difficult time.