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Bankrupt receives money from his late mother's
A man was declared bankrupt and a trustee in bankruptcy was
appointed to his estate in 2011.
In December 2013, the bankrupt's mother died and, after a
grant of probate was made in February 2014, the proceeds of her
estate were distributed. Her estate included, amongst other assets,
the proceeds of a regulated superannuation fund.
Under the Bankruptcy Act 1966 (Cth), payments made from
a regulated superannuation fund to a bankrupt after the date of
bankruptcy, unlike other payments, do not have to be divided
amongst the bankrupt's creditors.
Part of the mother's estate, an amount of $87,900.33, was
distributed to the bankrupt in accordance with her will. The money
was paid to the bankrupt's wife because the bankrupt did not
operate a bank account in his own name.
The trustee brought proceedings against the bankrupt's wife
seeking a declaration that the money was not excluded under the Act
and should be divided amongst the bankrupt's creditors.
case a - The case for the bankrupt's wife
cae b - The case for the trustee in bankruptcy
- The grant of probate of my mother-in-law's estate
separately identifies funds in the amount of $248,696.49 held by
her in a regulated superannuation fund.
- The funds were received by solicitors for the estate, not
intermingled with any other funds, and were distributed separately
to the beneficiaries of my mother-in-law's will in March
- The fact that the payment was made through the solicitor and
the estate does not alter the nature of the payment as being made
directly and solely from a regulated superannuation fund.
- I received the money at a time when I was unaware that my
husband's bankruptcy had been extended and the money has since
been spent. It would be unfair to make me repay the money.
- The bankrupt did not have an interest in the relevant
superannuation policy, his mother did.
- The payment to the bankrupt's wife was not from a regulated
superannuation fund, it was a distribution from the estate of the
bankrupt's mother under the terms of her will. If it had been
made direct from the fund there would be evidence to support this,
but none has been provided. Indeed, it's clear the money passed
through several hands.
- The bankrupt was a residuary beneficiary under his mother's
will – that is, he was only entitled to all or part of the
remainder of an estate after all the specific gifts had been given.
That means he had no proprietary interest in any of the specific
assets of his mother's estate, he merely had a right to ensure
that the executors or administrators of his mother's estate
completed their duties.
- The funds should be repaid and divided amongst the
bankrupt's creditors in the usual way.
So, which case won?
Cast your judgment below to find out
Vote case A – the case for the bankrupt's wife
Vote case B – the case for the trustee in bankruptcy
Stacks Law Firm
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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