Frequently asked questions about debts of an estate answered
What are the legal actions required by a personal representative when confronted with debts of an estate?
Very few individuals do not have some sort of debt or ongoing payment obligation. For the personal representative of an estate, this means one aspect of distributing assets involves managing the debts of the deceased. The Fair Debt Collection Practices Act prevents creditors from going after the surviving family members of the deceased for debt collection, unless those family members have personally guaranteed the loan. However, creditors do have rights during the distribution of an estate.
Below are some frequently asked questions by personal representatives regarding dealing with creditors and the debts of an estate.
I am the personal executor of an estate with debts. What do I do now?
A personal representative is a person or other entity (like a bank or trust company) that administers an estate through probate. The deceased individual will usually have named the personal representative in a will. Otherwise it is resolved through probate court. The personal representative is charged with gathering all assets of the estate, paying creditors, and then distributing the remaining assets according to the terms of the will or trust – in that order.
How do I know who to pay?
When a person dies, creditors must be notified. Florida law requires the personal representative to accomplish this by publishing a Notice to Creditors in a newspaper published in the county in which the estate is administered once a week for two consecutive weeks. The personal representative must also notify individual creditors. The personal representative is responsible for searching for creditors; however, the search does not have to be “impracticable” or “extended,” according to Florida law.
When do I have to pay creditors?
After creditors are notified regarding the death of a debtor, they have a limited time to make a claim for repayment, although exceptions exist. If they are legitimate debts, and no objection is filed, then the personal representative must pay creditors before otherwise distributing an estate. This includes paying any taxes owed by the deceased or the estate.
The personal representative can object to any claims made on the estate that he or she feels are invalid. An example of this is if a creditor is properly notified but fails to make a claim before the legal deadline passes.
Distributing an estate too early is risky. While it can be tempting for a personal representative to distribute assets, and beneficiaries may be pressuring the representative to do so, the full distribution of an estate may take some time to do correctly under the law.
Why do I need an attorney?
A personal representative has numerous legal obligations and duties. . In some cases, failing to perform those duties can lead to personal liability. This means the personal representative’s own assets may be at stake.
For example, under Florida law, a personal representative who fails to notify a creditor “in good faith” – meaning the personal representative did not find a creditor despite reasonable efforts – then there is no personally liability. However, if a personal representative simply refuses to pay creditors or distributes the estate without paying creditors first, then there is a possibility the creditor could come after the assets of the personal representative.
That is why understanding legal obligations throughout probate are so important. An attorney can guide the personal representative through the probate process and ensure compliance with Florida law.
At Korshak & Associates, personal representatives can get experienced, professional help with administering an estate.
Keywords: Probate, personal representative, debts, creditors, legal duties, personal liability, probate attorney, wills and trusts.