Monday, August 23, 2010

Advice about inheritance and bankruptcy - UK please?

My mum has asked me to help sort out her financial affairs and Will so we have been discussing things and she is concerned about my brother. Basically he is awful with money, spends it on alcohol, has debts mounting up and in particular a tax debt of 拢40,000 and rising. It started off as 拢3,000 but because he ignored the letters interest accrued on a daily basis. He keeps saying he is going to file for bankruptcy and has started the process but my mum and I have heard that if he declares himself bankrupt and mum passes away that any inheritance he receives will still have to pay off his debts. He seems to think once you are bankrupt you don't have to clear your debts. Mum doesn't think its fair all her hard earned money should go on debts. Who is right? UK only please as laws are probably different.Advice about inheritance and bankruptcy - UK please?
Your Mum needs to legally tie up your brother's share of any inheritance she is leaving him. Both because of the potential bankruptcy, and also, if she gives him free access to it, he'll fritter it anyway if money burns a hole in his pocket.


Mum needs legal advice. It will be worth a solicitor's fee. I think to leave any assets in trust would be the best way, with trustees to control what happens to his money. It doesn't matter how old he is. If his tax debt goes on it is likely he will be made bankrupt by HMRC. Even if he was taken to County Court instead, inheritances are public knowledge when Probate is granted, and Court could order debts paid from his legacy once he had received it.Advice about inheritance and bankruptcy - UK please?
he would need to be discharged as a bankrupt before he came into the money. This usually happens 12-24 months after filing for bankruptcy.





Perhaps if it possible, another solution could be found, eg leaving a property to a different relative (a grandchild?) but allowing your brother to live in the house until his death.





See a solicitor, the fee will be nothing compared to the peace of mind you will get, plus any long-term savings
you have heard right, any money received in way of inheritance, lottery winnings etc can be taken by the official receiver to pay off the full amount of your bankruptcy if there is enough, or a reasonable amount of it if there isnt.





the only money they cannot take is compensation from personal injury or medical compensation
If he is an undischarged bankrupt it is likely that any inheritance will be used to repay his creditors. The position is complex %26amp; your mum should really talk to a solicitor about this. You do need professional advice. Hope this helps.
right,





Firstly - Any sums of money given as a gift from your mother, are taxable if she passes away before 7 years of giving the said sums to your brother. So - she can give him money but if she dies before 7 years has passed, the tax man will come knocking on your door, wanting the money even if it has been spent.





Secondly - Regarding Bankruptcy, this is a little trickyier. Bit too much to write. I strongly reccomend you see your accountant. If you dont have one, get one, you need one. It wont cost you an arm and a leg, and the professional advice will clear the air much better than random answers on here. A good account can easily tell you the ins and outs of this as its bread an butter work for them.





Thanks
Im not sure about income tax debts but yes normally when you go bankrupt your debts are cleared. Until you have been discharged from Bankruptcy any money that you earn or inherit of any real value would be used to clear the debt. The receivers are fair, they do allow you a reasonable amount to survive off and are very lenient with first time bankrupts. I believe these days most people are discharged after 1 year of been declared bankrupt.
Your Mum needs to speak with a solicitor before she does anything.


In the US, ans Inheritance can be left in a Trust that is overseen by a Trustee. For someone that is ';awful with money'; it can be left in what is called a Spendthrift Trust and the Trustee pays necessary living and educational expenses from it like rent, utilities, property taxes, etc. Possibly a small cash allowance if that is allowed under the terms of the Trust. Your Mum would designate the terms. But since the beneficiary has no direct control of the estate it may well be that the money in the Trust is not ';attachable'; for taxes owed by the beneficiary. There are probably very similar ways under British Law to accomplish the same thing.

No comments:

Post a Comment