Bankruptcy and Death
Thanks for commenting on my question. I have another.
My relative passed away and then I discovered that he left no will and had filed bankruptcy last year which he did not make payment on. It looks as if he sold anything of value he might have had and left a huge mortage. I have talked to the trustee and they were nice to begin with. I paid for the funeral and other expenses to date. His utilites also all had disconnet notices. He left a huge mess behind. There is a survior benefit on his pension with a named benifiery as well as a small life insurance policy with named benifiery. I have also applied for the CPP death benefit. I was hoping this would pay for the funeral. Now the trustee is saying they may go after the pension and life insurance.
Can they do this? Can they take the CPP benefit to? Should I just walk away from everything? Sad that while trying to do what I thought was the right thing may very well but me in to bankruptcy if the trustees take everything. Can anyone offer some advice?
Our purpose is not to deal with specific problems on this site – it is to respond to general questions. I will give you my thoughts on your follow-up, if you require more information I suggest you contact me directly off-site and we can chat on the phone.
First – a named beneficiary does not protect the cash value of insurance or pensions from a trustee. Only a specified beneficiary does that: grandparent, parent, spouse, child or grandchild. Any other beneficiary and the plan can be seized by the trustee prior to death.
Once the insured dies, and the benefit is payable to someone other than the deceased’s estate then a trustee has not rights to the money (the life insurance benefit is an asset of the person that received it, not the deceased bankrupt). If the beneficiary is the deceased’s estate then the benefit will be paid to the trustee.
Regarding the CPP death benefit – the trustee does have a right to apply for it. The government will pay it to whomever claims it first – assuming the claim is valid.
Finally, some (if not all) of the funeral and burial costs should be paid by the trustee – if you have paid them personally, you have the right to claim repayment for a portion from the bankrupt estate. In particular, if the trustee has received the CPP death benefit or any insurance proceeds then I would send the trustee the bill. If the trustee is unco-operative, which is unlikely, but if they are you may need to hire a lawyer to resolve things.
Good luck sorting this out.