What happens if a Beneficiary is Bankrupt?

May 27, 2022 | Wills

If you are dealing with the estate of someone who has died, you need to check whether any of the beneficiaries have been declared bankrupt. If you mistakenly distribute part of the estate to a bankrupt beneficiary, the trustee in bankruptcy could bring a claim against you to recover any money that they were not able to retrieve from the beneficiary.

As the executor or administrator of an estate, you have a duty to distribute the net estate to the right beneficiaries. Where someone has been declared bankrupt, their trustee in bankruptcy will take over their financial affairs. Any income gained by the bankrupt individual during that period should be paid to the trustee.
The trustee will provide the bankrupt individual with living expenses and the remaining funds will be distributed to the creditors in order of preference.

When should an inheritance be paid to a trustee in bankruptcy?

If the individual in question was an undischarged bankrupt at the time of the deceased’s death or made bankrupt before the estate administration was finalised, the estate’s executor or administrator should pay their legacy directly to the trustee in bankruptcy.
If the amount passed to the trustee in bankruptcy exceeds the amount owed to creditors, then the remaining sum will be paid to the beneficiary by the trustee in bankruptcy.

Liability when a beneficiary is bankrupt

A bankrupt beneficiary is under a duty to declare their inheritance to the trustee in bankruptcy. Failure to do this is an offence.
The executors or administrators also have a duty to ensure that money from the estate is paid to the correct person.
If the executors or administrators were to pay the inheritance to a bankrupt beneficiary and the trustee in bankruptcy was not able to recover the full sum, they could make a claim against the executors or administrators, who could be held personally liable for repaying the money as well as the trustee in bankruptcy’s legal costs in recovering it.

Avoiding liability

To avoid liability for paying it to a bankrupt beneficiary, a bankruptcy search should be carried out before payment is made.
Dealing with an estate after a death can be complex. Our probate solicitors represent executors and administrators, ensuring that the paperwork, such as HM Revenue & Customs forms, probate applications and estate accounts are correct. We also always carry out bankruptcy searches to make sure that beneficiaries are entitled to receive the sums paid to them.

Contact us

If you would like to speak to one of our expert probate lawyers, ring us on 01252 268862or email us at marie@mgfwills.co.uk

Or, if you’d rather arrange a face to face appointment:

Hannah Dunmall
Hannah Dunmall
04/03/2021
Verified
I would highly recommend MGF. Marie guided us kindly and professionally from the first initial phone call to the final signing. She provided an un-pressured, user friendly service, that was very personal and efficient. We were very ignorant around the whole subject of wills and lasting powers of attorney, but Marie always made us feel that no question was a stupid one, and gave her time and attention to ensure we understood all that was involved. We have peace of mind now that we have everything in order, and wouldn’t hesitate to recommend Marie.
Nicole Falleur
Nicole Falleur
26/02/2021
Verified
I found this lady's business on an online search for a local will writer / solicitor for my Mother & I to write our wills after having not so positive experiences with previous companies we'd tried & Mum preferred to relate to a lady & I found that she was in our area & the only 1 who had 100% 5* Star ratings from all her customers who'd left reviews ! So we contacted her & went from there ! 🙂 We could not have found or wished for anyone better ! She offers such a personal service & is so easy to communicate with & is very knowledgeable & goes "the extra mile", nothing seems too much trouble & despite being a very busy woman, she gives as many extra hours of her time as her clients need & she does it all at a set fee ! She does not charge extra add on, additional charges for every hour, phonecall, Zoom call, visit, paperwork she does for you, she keeps to the very competitive price she quoted at the outset, which we found most unusual & refreshingly nice & welcome & very much appreciated indeed, no hidden charges or fear of nasty, frightening financial surprises ! She is such a very lovely person, personable, natural & relaxed to deal with, competent & efficient, keeps her word & punctual, doesn't let you down. We couldn't find better & she truly exceeded our expectations & we will use her again as she offers multiple legal services as listed on her website. Thank you Marie !
Victoria Shortland
Victoria Shortland
26/02/2021
Verified
Fabulous service from MGF Wills and Estate Planning. Marie was very helpful and answered our many many questions very patiently! I felt that Marie really knows her stuff and is very reasonably priced. Highly recommended.
Mr Clive Wills
Mr Clive Wills
12/02/2021
Verified
My wife and I had Mirror Wills drawn up. Marie was very professional, friendly and excellent communication throughout. She talked us through all aspects of wills. A very straightforward process and job done promptly. Completed in a Covid safe way. We would definitely recommend MGF.
Lissy Evett
Lissy Evett
11/02/2021
Verified
My objective was to find a good and affordable Will writing service that could accommodate me in a timely manner. I found all of those things with Marie Forkner, from the MGF Wills & Estate Planning Service. Great customer service, professional, knowledgeable, and friendly. I highly recommend MGF Wills & Estate Planning Service. Excellent!
Kerry Davis
Kerry Davis
01/02/2021
Verified
Please do not hesitate in using MGF Wills. Excellent, knowledgeable service with unbiased advice and guidance. Look no further for your future planning needs. Highly recommended to anyone considering Will writing/storage etc. Wouldn’t hesitate recommending to friends and family A*.
Doug
Doug
24/01/2021
Verified
We would highly recommend MGF Wills. We had a will made last year. Marie was thorough, patient and willing to answer all our questions. There was no pressure put on us. Pricing was clear from the start. Highly recommended.
Carruthers Family
Carruthers Family
20/01/2021
Verified
Friendly advise & clear directions making completing our 1st Wills very straight forward. Have already recommended to a friend. It didn’t matter that it was all completed over the phone rather than face to face.
Mark C
Mark C
18/01/2021
Verified
Great service, competitively priced and quick turn around time. Marie explained everything clearly and was very knowledgeable. Would definitely recommend.
Mark Smith
Mark Smith
13/01/2021
Verified
Marie drew up the wills for my partner and I. She was professional and accommodating throughout the entire process. Everything was explained clearly and there was no such thing as a silly question. She even took the time to walk us through the signing process with our neighbours! We would thoroughly recommend Marie and will be using her in future if and when we need to update our wills.