Creating a valid Last Will and Testament is one of the most important actions you can take toward a comprehensive estate plan. This is because this document allows you to name who gets your assets and when they get them after you have, unfortunately, passed on. However, your written plans may be affected if you file for bankruptcy. Follow along to find out what happens to your will if you go bankrupt and how a proficient Butler County will preparation attorney at Heritage Elder Law & Estate Planning, LLC can help you handle this situation.
What happens to my Last Will and Testament if I go bankrupt?
When drafting your Last Will and Testament, you may not have anticipated that you would incur some sort of financial hardship. And with any debt that you accrue over your lifetime, the property and assets you plan to distribute may be impacted. This is because, regardless of what the situation may be, your debts must be paid off before your beneficiaries receive any type of inheritance.
For example, say that you are undergoing a Chapter 7 filing, but unfortunately passed away during the process. In this instance, your assets will be liquidated until your creditors are compensated. Then, your assets that remain will be distributed to your beneficiaries accordingly.
However, say, for example, that you are undergoing a Chapter 13 filing but unfortunately pass away during the process. In this case, the process gets a little more complicated, as you held a promise to pay back your debts in a three to five-year timeline. So, your trustee will likely have to take on this responsibility and carry out any of the following actions:
- File a petition with a Pennsylvania bankruptcy court and request a dismissal of the case.
- File a petition with a Pennsylvania bankruptcy court and request a hardship discharge.
- File a petition with a Pennsylvania bankruptcy court and request a conversion to a Chapter 7 bankruptcy.
From here, the Pennsylvania court will make a final judgment that they believe to be in the best interest of the trustee and beneficiaries.
What should I do with my Last Will and Testament if I file for bankruptcy?
The most important thing you can do is remember that your Last Will and Testament will not be immune to your bankruptcy filing. And with this in mind, you must do every tool at your disposal so that you do not leave a burden on your trustee and beneficiaries after you have passed on.
First, you should do everything in your power to pay off your debts and complete your bankruptcy process. This can be done with the help of a talented bankruptcy attorney.
Then, you should sit down and determine how your bankruptcy process affected the property and assets you intended to pass down, and edit your Last Will and Testament as necessary. All the while, you should openly communicate this with your trustee and beneficiaries. This can be done with an experienced Butler County estate planning attorney, so give our firm a call today.