What Happens When a Claim Is Filed Against a Probated Estate?

By Beverly Bird

Even the most frugal and disciplined people usually carry debt of some kind, whether it’s a mortgage, an auto loan, or a single credit card. Others have numerous credit cards and have signed for several personal loans. When an individual dies, his estate is responsible for paying these debts, but only if his creditors make a claim for their money.

Statute of Limitations

The decedent's creditors do not have an unlimited amount of time to make claims against his estate for money he owed them. Statutes of limitation and procedures vary somewhat according to state law, but in most jurisdictions, the estate's executor must post a notice to creditors in the newspaper shortly after opening probate. Some states require the executor to also send written notice to creditors she knows about. After receiving notice, creditors must usually act relatively quickly to file a written claim with the executor. For example, in Ohio, they have six months, but in Vermont they have only four months.

Executor’s Decision

An estate’s executor usually doesn't rubber-stamp a claim as soon as she receives it, but will typically set it aside for further review.. If she pays a debt that’s not legitimate, the laws in some states allow the estate’s beneficiaries to hold her personally responsible. Since she won’t risk this, she won't pay anyone before she’s sure the estate has enough money to satisfy all claims. Generally, by the time creditors begin making claims for payment, the executor will have made a thorough inspection of the decedent’s personal paperwork and can match claims against invoices and statements. She can check the claimant’s amount against what the decedent’s records indicate he owed. If there’s a discrepancy or she has reason to doubt a debt is legitimate, the executor can deny the claim.

Protect your loved ones. Start My Estate Plan

Contesting the Decision

An executor does not have the final say regarding debts she decides not to pay. If she denies a claim, the creditor has a right to go over her head and ask the court to overrule her decision. In most states, this means filing a lawsuit for payment in probate court. Statutes of limitation usually exist for these lawsuits as well; otherwise, probate might drag on interminably and the estate would never settle. For example, in Ohio, a claimant has only two months to file a suit. An executor has the right to defend her decision to the court and, ultimately, a judge will decide whether the estate pays the claim. This relieves the executor of any responsibility for paying it if the claim turns out to be illegitimate.

Insolvent Estates

Satisfaction of creditors’ claims is contingent upon the estate having enough money to pay all of them. Most states prioritize claims, meaning some claimants receive payment before others. Usually, the executor pays taxes, funeral costs and expenses of operating the estate first. If the remaining estate funds are insufficient to pay other claims, creditors usually receive some portion of payment on a prorated basis and beneficiaries generally don't receive their bequests. Larger claims receive a greater percentage of the remaining money. The court will order liquidation of the estate’s assets to pay the creditors as much as possible. If the executor cannot pay any claims, the estate is insolvent. In this case, its beneficiaries don’t receive anything either.

Protect your loved ones. Start My Estate Plan
What Does It Mean to File a Suit on an Estate?
 

References

Related articles

Can the IRS Come Back for Taxes After the Estate Is Closed?

Most people do not owe estate taxes when they die, so they should not be a critical part of your estate planning unless you believe the total value of your estate will exceed the federal estate-tax exclusion amount -- $5.25 million, as of 2013. If the value of your assets is more than this, the burden of filing and paying estate taxes falls to the executor of your will during the probate process. If she doesn't do her job properly, the IRS can look to her for payment after your estate is closed.

What Is the Legal Procedure After the Death of a Person Who Doesn't Leave a Will?

Less than half of Americans -- only 35 percent – had wills as of 2010, according to Forbes.com. Unsurprisingly, states must implement laws to address the estates of those who do not. These people are said to have died “intestate,” but their property must usually still pass through probate to transfer title to heirs. Someone must also pay the decedent’s debts, and probate takes care of this also. Probate without a will is very similar to probate with one, but it usually involves a little more court supervision.

Can You Be Forced to Sell a House You Inherited to Pay Off the Medical Bills of the Deceased?

Even in death, people are responsible for their own debts -- at least to the extent that they leave enough money behind to pay them. The law doesn’t hold beneficiaries and loved ones responsible for paying bills the decedent incurred before he died, including medical bills. However, this doesn’t always mean that his bills won’t have an effect on your inheritance if you’re a beneficiary.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Filing a Complaint Against the Decedent in Probate Court

Technically, you cannot file a legal complaint or initiate a lawsuit against someone who has died. However, this ...

State of Georgia Guidelines to Show That a Personal Estate Is Insolvent

Think of it as bankruptcy for the dearly departed. When a person’s estate doesn’t have enough assets to cover its ...

Trouble With an Executor

Just because your loved one trusted an individual enough to name her as executor of his will, doesn’t automatically ...

Does an Executor Have to Assume Unpaid Debt in Michigan?

The executor of an estate has a great deal of responsibility in Michigan and elsewhere. Personally assuming the ...

Browse by category
Ready to Begin? GET STARTED