Elective Share and Bankruptcy

The bankruptcy code provides that if a debtor acquires or becomes entitled to inherit property within 180 days after filing a bankruptcy, the right to that inheritance belongs to the bankruptcy trustee. So if a person dies during that time, and the debtor is the beneficiary of the will or life insurance, the debtor is obligated to turnover these funds.

In a recent case, Judge Paul Hyman in the Southern District of Florida addressed the issue of an elective share. In Re Miller, Case No 09-19821, adv No 10-3152., 441 BR 154 The debtor’s husband died on March 6, 2009. Debtor filed bankruptcy on May 14, 2009. The husband had an IRA in which the children were the beneficiaries. So the debtor apparently had no right to these funds. But actually, the debtor had a right to claim an elective share of 30% of her husband’s assets. The debtor did not assert the election until 350 days after the petition was filed. The trustee, Michael Bakst, claimed that the funds had to be turned over. trustee.

Judge Hyman held that the elective share is a personal right of the debtor and was not property of the estate. The personal right was not a property right. (Consider the likelihood of a different result if the debtor had been a beneficiary of a will and filed a disclaimer in the probate case).

As a Fort Lauderdale bankruptcy attorney, probate issues at times must be considered to properly represent my client.

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