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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I am the beneficiary of a residuary trust created from my fathers

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I am the beneficiary of a residuary trust created from my father's estate but I cannot receive distribution until my mother's death. How will this be handled if I file for bankruptcy in Texas?
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 6 years ago.

Hi JACustomer,

Does the trust have a "spendthrift" clause in it? (A spendthrift clause is one that says the money cannot be used to pay creditors.)

Customer: replied 6 years ago.
I will have to check my father's will but since it was drafted prior to 1968, his year of death, I doubt it. I don't remember seeing it but I will check and get right back to you.
Customer: replied 6 years ago.
Just read entire will and there is NO spendthrift clause in it.
Expert:  cfortunato replied 6 years ago.

A "spendthrift" clause would exempt (protect) the trust from the Bankruptcy estate. Otherwise, the Bankruptcy trustee can take the trust whenever you become entitled to it (when your mother passes away) - regardless of how long that takes, and can discharge debts, but keep the case for that long. (I know a trustee who has been holding a Bankruptcy case open for about 7 years.)

In other words, the trust is treated as if you have already inherited it, even though you cannot yet touch it.


I think this is what you wanted to know. If not, please let me know.
Thank you!



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