Attorneys Stephen Korshak and Lee Karina Dani

Dealing with creditors during probate

by | Mar 11, 2015 | Estate Administration |

Depending on what stage of life a person is in when he or she passes away, he or she may die with several unpaid debts. While it may be nice to have the mortgage and business loans paid off before death, life is often less tidy than that.

Thus, many personal representatives find they must use the funds of the decedent’s estate to pay off claims by creditors, as well as disbursing gifts to beneficiaries. State law lays down the process of giving creditors the chance to make claims against the estate.

First, the personal representative is responsible for making diligent efforts to give creditors actual notice of the decedent’s death. Reasonable efforts must be taken to notify all “known or reasonably ascertainable” creditors, and all debts must be paid off before distributing the remaining assets to the beneficiaries.

Once potential creditors have received notice, they generally have three months to file a claim with the clerk of the circuit court that is presiding over the probate of the estate. The personal representative then has the chance to object to the claim. Perhaps he or she has reason to believe the debt was already paid off, or that it was not the decedent’s responsibility.

In response to an objection, the creditor may file a lawsuit to settle the matter. The suit will determine whether the party’s claim is valid, and should be repaid, or invalid.

Testators who do not want their estate to be swallowed up by debt, taxes and probate expenses should bring their concerns to their estate planning attorney.