Estate Planning – Probate & Notice to Creditors

After the death of a loved one, it is understood that family members and beneficiaries may obtain property, money, and other items in the probate process, but what about the debt they may incur? Beneficiaries sometimes incur leftover bills, loans, and mortgage payments that will come out of their inheritance where applicable.

A notice to creditors is required during probate regarding the death of the account holder. It is imperative to understand what a notice to creditors is and what is involved in this part of the probate process.

What is the notice to creditors?

A notice to creditors is publicly published once per week for three weeks (successively) in a newspaper or other general circulation in the county where probate is opened. It must announce the personal representative’s (PR) appointment, address, and it must notify the creditors of the estate, giving them the allowed time to present their claims.

How long do creditors have to present their claims?

Four months after the first public notice is published is common. The notice must include that if the creditors do not respond within that time-frame, their claims will be forever barred. In other words, they will not get paid or have any right to monetary payment thereafter. Written notice to the creditors is also required of the PR. The same rules and time-frame apply.

Any known creditor that does not receive their written notice has two years from the date of the debtor’s death to present their claim. There are no exceptions for this two-year limit.

Who is responsible for creating the notice to creditors?

Creditors are not entities named in a will, but that doesn’t negate their rights to get paid what is due to them during the distribution and settlement of an estate. Personal representatives should know and understand how to handle creditors’ claims in probate.

It is during the probate process that estates are administered. It is the responsibility of the estate’s personal representative to honor the claims of creditors and to honor the rights of the beneficiaries.

Who pays the creditors?

Secured creditors do not go through probate. They may choose to foreclose or sell a property as if the debtor is still alive. If no one has opened a probate, any creditor may do the same within 45 days of the death of the debtor. They will be appointed a personal representative in this case.

Estate funds are used to pay creditors’ claims through the estate’s administrator or executor.

Allowed & Disallowed Creditor Claims

After the creditor submits their claim, the PR can allow or disallow it within 60 days after the final day allowed for presentation of claims.

Where a claim is disallowed, the creditor may file a Petition of Allowance of Claim for file a civil complaint for monetary recovery. These deadlines cannot be waived, tolled, or extended whether the personal representative agrees in writing or not.

Administration of Creditor Claims

The administration of claims and the estate in general during probate involves the following:

• Asset Collection – Assets much be collected. This process can range from simply removing the decedent’s name from the asset or having the beneficiaries file a claim. Life insurance is usually designated to a beneficiary, so it is paid out as death benefits to the beneficiaries.
• Creditor Claims – Second, creditor claims are assessed, then accepted or rejected. Last minute, final medical care is a common debt incurred by a decedent. Burial, cremation, funeral, and other final expenses are also part of claims that must be paid before beneficiaries receive any estate assets. This can become very involved, therefore you need an experienced attorney to help with this process.
• Tax Filings – Any taxes due to the local, state, or federal government are handled as an estate return filing. Your CPA should work with your attorney during this administrative process.
• Distribution – After all these elements are completed, then estate property, money, and other assets transfer to the beneficiary.

If you need help with creating your estate plan or a probate you are a part of, or if you are interested in learning more about the probate process, including notice to creditors, schedule a free 30-minute consultation and let us assist you in your estate planning goals today.

This article is provided as a public service by the Law Offices of C. David Martinez, PLLC. While the information on this site is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.