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INHERITANCE AND BANKRUPTCY

IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO.  WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.

In re Costas, 06-16520, 555 F.3d 790 (2009) (BAP 9th Cir. 2008)  Costas inherited $34,800, but refused to accept it and, on November 7, 2002, executed a disclaimer under Arizona law to relinquish her claims to the Trust property.

December 3, 2002, Costas filed a Chapter 7.  Maureen Gaughan, trustee, sought to avoid Costas’ disclaimer of the Trust property under 11 U.S.C. § 548 as a fraudulent conveyance within a two year pre-petition. The question in this case is whether an Arizona disclaimer qualifies as a “transfer … of an interest of the debtor in property.”   BAP decided “not a transfer”Arizona’s relation-back rule says that a disclaimant neither transfers nor possesses an interest in disclaimed property and thus creditors cannot reach the disclaimed interest.  We hold that a disclaimer, properly executed under Arizona law, is not a “transfer … of an interest of the debtor in property” for purposes of § 548.

In re BrownBrown vs Barclay, BAP No. SC-17-1068-AKuS (5/21/18) BAP for 9th Circuit affirmed summary judgment entered by bankruptcy court (SD Cal.) in favor of plaintiff-chapter 7 trustee avoiding debtor’s postpetition transfer of inheritance proceeds to his brothers. Because of debtor’s bad faith, postpetition receipt of inheritance proceeds while in chapter 13 remained property of chapter 7 estate under 11 USC 348(f)(2). Because debtor’s transfers were not ordinary and necessary expenses, 11 USC 348(f)(1) did not safe harbor transfers of inheritance proceeds from estate. Consequently, postpetition transfers of property of estate were avoidable.

In re Berryhill, 2:19-07421-BKM The Court has reviewed the party’s arguments and the case cited by Mr. Mumme, In re Royal 165 B.R. 802 (Bankr. MD 1994). In analyzing a Maryland exemption statute, the court in Royal determines that it is appropriate to distinguish an inheritance from third party obligations triggered upon a person ‘s death.
“This distinction is significant because the Maryland statute lists out various third party obligations as being covered by the statute. In contrast, ARS 33‐1126(A)(1) lists no such examples and by its wording applies to any and all monies “payable or received… upon the life of a deceased….” The Court agrees with the analysis in In Re Thiem that the Arizona statute contains nothing to suggest the source of the funds received by the beneficiary is limited to insurance pay outs, or to amounts paid from third party sources. The Court, thus, concludes that ARS 33‐1126(A)(1) applies to all monies received by way of inheritance. Accordingly, the Trustee’s objection to Debtor’s exemption is overruled”


Profit v. Savage (In re Profit), 283 B.R. 567, 576, n.12 (9th Cir. BAP 2002) After the chapter 13[2] trustee (“Trustee”) learned that Andrew and Marilyn Profit (“Debtors”) had acquired, postconfirmation, potentially nonexempt residential real property, she filed a motion to compel them to amend their schedules and modify their confirmed plan to pay 100% of all allowed unsecured claims. The motion was filed in the plan’s 54th month. The motion contained neither new plan provisions nor a method for recouping the asset’s cash value, which had been transmuted into another alleged homestead.

Notwithstanding these problems, the bankruptcy court granted Trustee’s motion *570 and issued its order after the 60-month plan duration had expired and all payments had been completed. Its decision was published at In re Profit, 269 B.R. 51 (Bankr.D.Nev.2001).

We conclude that plan modification contravened the requirements of §§ 1322(a) and 1329(c), which require certain plan content and prohibit a modified plan from exceeding 60 months in duration, and we REVERSE. Debtors are entitled to a discharge.


In re Dale, (9th Cir. BAP, 2/5/2014)  Chapter 13 trustee, Maney, prevailed on a pre-confirmation inheritance (but post 180 days) in a chapter 13 in that it is property of the estate and must be surrendered. Debtors, Robert and Kathy Dale, appeal the bankruptcy court’s, determination that an inheritance Mr. Dale received from his, mother more than 180 days following the petition date but prior, to confirmation of a plan in the Dales’ chapter 13 case was an asset of their bankruptcy estate.

Ultimately, we agree with the analysis of the Fourth Circuit in Carroll v. Logan, and we conclude that the bankruptcy court did not err in determining that an inheritance received by chapter 13 debtors more than 180 days following the petition date but before confirmation of a chapter 13 plan and before the case is closed, dismissed or converted is property of the debtors’ bankruptcy estate.We AFFIRM.

Casey v. Steinmann (In re Downs), 18-01168 (Bankr. C.D. Calif. Nov. 17, 2020) Removing a debtor as a beneficiary of a revocable, inter vivos trust is not a transfer that a trustee can set aside. A contrary result “would turn the privacy of estate planning into a minefield for both (trust) trustees and beneficiaries,” according to Bankruptcy Judge Scott C. Clarkson of Santa Ana, Calif.

Elderly parents created a revocable, inter vivos for their nine children. Evidently, the trust had substantial assets. A daughter was in financial trouble. After conferring with her, the parents removed her as a beneficiary of the trust. After the change, the daughter filed a chapter 11 petition in 2016 that was converted to chapter 7 in 2017.Chapter 7 trustee sued the parents and other siblings for fraudulent transfer.