Ch. 13 And Trust Income
I'm likely going to file under Chapter 13 and am soon to see an attorney. Just wanted to ask about this topic beforehand as I cannot find too much on this elsewhere. Anyway, I presently pay a monthly amount through Consumer Credit Couseling Services but cannot afford to continue to do so. I am not a candidate for Chapter 7 as I desire to pay my creditors (all unsecured credit card debt) a fair (if not complete) amount on my debts, I have a job and steady income from it, and receive a small monthly income from a trust. My question is about my trust income and I'd very much appreciate any information you folks could provide. I'm the so-called "income beneficiary" of a trust set up by my Father's will -- by the way, it is NOT a "spendthrift trust" (although I did wind up being a bit of a (now reformed) spendthrift . . ). I receive all the income generated by the trust principal each month (after trust company fees), and have no access to the principal under ANY circumstances. The trust principal will go to my son (the trust's "remainderman") upon my death which I selfishly hope is not very soon. So, how does a Chapter 13 bankruptcy treat this situation? To me, the trust is like some pensions paid out on a monthly basis for a person's lifetime, i.e. the recipient has no access to the underlying principal. In effect, my trust income is like a pension's income "stream," not something I "own" to the extent that I can draw on the principal that generates the income. Of course, that income is mine (I "own" the right to the trust's income for life), but really, the actual "owner" of the principal is my son when I die, and I suppose, the bank is sort of a quasi-owner of the principal now in trust for my son. I'm just wondering about how this item will be treated in the Ch. 13 process. Hoping you folks can help. Thanks!!
While the answer depends on the specific terms of the trust, most are set up so that they are *not* subject to the claims of beneficiary's creditors. They are thus not "property of the estate" for the purposes of the bankruptcy, and are not an estate asset. I'd heard that a trust's income "stream" would be treated as an asset that the individual would be forced to sell (in a Ch. 7). In a Ch. 13, I'd heard that the individual would be required to get a "present value" of the trust's income stream (based upon the person's expected life span from annuity tables), and then to add that value to the asset total.
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