Having learned that assets subject to a spendthrift trust provision aren’t property of the estate, we omit them from the schedules. Patterson v. Shumate.
Forgetting, of course, that Schedule B asks for interests in retirement plans and pensions, which are not property of the estate.
And forgetting, I think more importantly, that the schedules should tell the client’s story. A story that makes sense and is complete.
Half the story
All this springs from a special appearance I made as the holiday approached. I’m mindful of the string of cases that say that an attorney making a special appearance becomes the debtor’s attorney just as surely as the attorney hired by the debtor.
So, I asked for the schedules in advance of the appearance. I’d been told the debtor was working age but longtime disabled.
The budget shows that the debtor lived alone, with monthly living expenses of $1700 and disability income of $900. How’d he do that?
The schedules were no help. No assets that throw off money. No sign of a room mate. No history of gifts in the SOFA. No clue….
So I asked the attorney, before the trustee could ask me.
Turns out, the debtor was the beneficiary of a special needs trust managed by a parent. The trust paid out the difference between disability income and expenses.
But there was no way to see that from the schedules prepared.
My questions of debtor’s counsel pointed out that there was something essential missing from the schedules. First, the debtor had an interest in the special needs trust. It needed to be disclosed.
My practice with assets that the debtor owns but aren’t property of the estate is to list them on B, label them in caps “NOT PROPERTY OF THE ESTATE” and put their value in the far right hand column as “0”. If you put a value in that column, the program will spit out schedules that make it appear that there are significant non exempt assets.
By listing it, I’ve met my disclosure requirements. But just as importantly, I’ve told the whole story, given the trustee the big picture: this disabled person makes it because he has another source of income.
So, take a look at the schedules you’ve prepared and ask if, taken as a whole, they tell the whole story. If they don’t, tweak them so they reflect reality. (all but B-22, which is fiction from the start<g>).
Image courtesy of Foto Havlin.