You are here:

House of Commons Library

Would a bankrupt be able to keep an inheritance?

Published Tuesday, October 6, 2015

A 'beneficiary of an estate' is an individual who receives, or may become eligible to receive, benefits under a will. Depending on the exact circumstances, a beneficiary who is still bankrupt may not be entitled to receive their inheritance, as it may need to go towards the payment of their debts under the bankruptcy. This briefing paper provides a brief outline of the position.

Jump to full report >>

This briefing paper applies only to England and Wales. Scotland has its own legal procedure for individual insolvency known as sequestration.

Once a bankruptcy order has been made by the court, an official receiver will be appointed trustee in bankruptcy (unless a private sector insolvency practitioner is appointed). As at the date of the order, the bankrupt’s estate vests in the trustee. The bankrupt’s estate essentially consists of all the property which belongs to or is vested in the bankrupt at the commencement of his bankruptcy. The function of the trustee is to collect in and sell the bankrupt's assets and to make payments to creditors in accordance with the Insolvency Act 1986 (IA 1986).

Occasionally, a Member of Parliament may be contacted by a constituent who, whilst bankrupt, becomes a beneficiary under a will. Any new assets obtained during the bankruptcy (i.e. after the date of the bankruptcy order and before the date of discharge) are referred to as ‘after-acquired property’, and must be declared to the trustee. The trustee can make a claim to it, under section 307 of the IA 1986, for the benefit of the creditors (subject to certain time limitations). It follows from this that any inheritance made to an undischarged bankrupt is potentially vulnerable to a claim by the trustee in bankruptcy. This briefing paper provides a brief outline of the position.

Commons Briefing papers CBP-7321

Author: Lorraine Conway

Topic: Insolvency

Share this page

Stay up to date

  • Subscribe to RSS feed Subscribe to Email alerts Commons Briefing papers

House of Commons Library

The House of Commons Library provides research, analysis and information services for MPs and their staff.