Understanding the Notice of Death to Creditors in Estate Administration
Assisting clients with Estate and Trust Administration is one of the most important legal services we provide at BPE Law. Today’s Article will focus on a critical requirement: the Notice of Death to Creditors.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like this, please contact me or Steve to setup a date and time.
Understanding the Notice of Death to Creditors in Estate Administration
By Steve Beede, BPE Law Founder / Counsel
When a person dies, if they have any assets that could be given to another (an heir or beneficiary) someone must obtain the legal authority to transfer those assets. In Probate it would be an Executor or Administrator appointed by the Probate Court; and in a Trust it would be the designated Successor Trustee. These are generally referred to as the Estate or Personal Representative.
While the Representative has many duties, ultimately they are looked to as the person who will distribute the decedent’s assets to designated beneficiaries or legal heirs. However, before this person can distribute those assets, they must first be certain that all debts of the decedent have been paid or otherwise satisfied. This can take at least three forms:
1. Notice to Creditors – In both Probate and Trust Administration, if the decedent’s representative is aware of any creditors, they must give written notice of the decedent’s death to each creditor so that they will have the opportunity to make a timely claim on the estate assets. In Probate, the law requires that the Notice of Probate be published in a newspaper which will serve to also give notice of death to any unknown creditors that may exist. Creditors include anyone to whom the decedent owed a debt including but not limited to loans, utility bills, charge cards, judgments, etc. If the representative approves the claim, it is paid out of the estate assets. If they reject the claim, the creditor will have to decide whether to file a lawsuit against the estate, negotiate a settlement, or simply waive the claim. Specific timelines apply to any such claim or legal action.
2. Notice to Dept. of Health Services – if the decedent received medical care which was provided by the State of California under the MediCal program, then the estate representative is also required to send a written notice to DHS so that they can determine if the State has any right to obtain monies from the estate under the State Reimbursement Program. While it is not required, most attorneys will send the Notice to DHS in any estate or trust administration just to be certain that a possible claim does not exist.
3. Notice to California Franchise Tax Board – within 90 days of a Probate appointment, the Estate Representative must provide notice of death to the State FTB so that it can be determined if there is any past or present income tax liability.
What if there’s not enough Money to pay them all?
Merely because there are creditors does not necessarily mean that they all will get paid. If there aren’t enough assets to cover the debts, the estate is said to be insolvent, and creditors may only be entitled to receive a portion of what their owed, if anything at all. Other creditors, such as DHS, are subject to legal restrictions on when and how much they can collect.
What if the Representative fails to pay a Creditor?
Creditors who receive legal notice of the death of a person have a legal right to get paid before any estate assets are distributed to beneficiaries or legal heirs. If the Representative fails to do so, they may be personally liable to the creditor to pay the debt. Alternatively, creditors can possibly “claw back” into the estate the funds wrongfully distributed to beneficiaries and heirs so that these will be available to pay the creditor’s claims. may be “clawed back” into the estate and used to pay creditors with valid claims.
The Administration of both Probate and Trust estates is complex, time-consuming, and subject to many controlling laws. Particularly at a time when the designated Representative may be grieving the loss of the decedent, experience legal assistance may be a must. For over 20 years, the attorneys of BPE Law Group, P.C. have been assisting our clients and their family members and other representatives with their real estate, business, and Estate Administration needs. If you have questions concerning this Article or have need for legal assistance, please either call our main office at 916-966-2260 to arrange a consultation or email your questions to Keith at kbdunnagan@bpelaw.com or Steve at sjbeede@bpelaw.com.
This article is not intended to be legal advice, lending advice, or a specific recommendation of any particular lender or company, and should not be taken as such advice.
Assisting clients with Estate and Trust Administration is one of the most important legal services we provide at BPE Law. Today’s Article will focus on a critical requirement: the Notice of Death to Creditors.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like this, please contact me or Steve to setup a date and time.
Understanding the Notice of Death to Creditors in Estate Administration
By Steve Beede, BPE Law Founder / Counsel
When a person dies, if they have any assets that could be given to another (an heir or beneficiary) someone must obtain the legal authority to transfer those assets. In Probate it would be an Executor or Administrator appointed by the Probate Court; and in a Trust it would be the designated Successor Trustee. These are generally referred to as the Estate or Personal Representative.
While the Representative has many duties, ultimately they are looked to as the person who will distribute the decedent’s assets to designated beneficiaries or legal heirs. However, before this person can distribute those assets, they must first be certain that all debts of the decedent have been paid or otherwise satisfied. This can take at least three forms:
1. Notice to Creditors – In both Probate and Trust Administration, if the decedent’s representative is aware of any creditors, they must give written notice of the decedent’s death to each creditor so that they will have the opportunity to make a timely claim on the estate assets. In Probate, the law requires that the Notice of Probate be published in a newspaper which will serve to also give notice of death to any unknown creditors that may exist. Creditors include anyone to whom the decedent owed a debt including but not limited to loans, utility bills, charge cards, judgments, etc. If the representative approves the claim, it is paid out of the estate assets. If they reject the claim, the creditor will have to decide whether to file a lawsuit against the estate, negotiate a settlement, or simply waive the claim. Specific timelines apply to any such claim or legal action.
2. Notice to Dept. of Health Services – if the decedent received medical care which was provided by the State of California under the MediCal program, then the estate representative is also required to send a written notice to DHS so that they can determine if the State has any right to obtain monies from the estate under the State Reimbursement Program. While it is not required, most attorneys will send the Notice to DHS in any estate or trust administration just to be certain that a possible claim does not exist.
3. Notice to California Franchise Tax Board – within 90 days of a Probate appointment, the Estate Representative must provide notice of death to the State FTB so that it can be determined if there is any past or present income tax liability.
What if there’s not enough Money to pay them all?
Merely because there are creditors does not necessarily mean that they all will get paid. If there aren’t enough assets to cover the debts, the estate is said to be insolvent, and creditors may only be entitled to receive a portion of what their owed, if anything at all. Other creditors, such as DHS, are subject to legal restrictions on when and how much they can collect.
What if the Representative fails to pay a Creditor?
Creditors who receive legal notice of the death of a person have a legal right to get paid before any estate assets are distributed to beneficiaries or legal heirs. If the Representative fails to do so, they may be personally liable to the creditor to pay the debt. Alternatively, creditors can possibly “claw back” into the estate the funds wrongfully distributed to beneficiaries and heirs so that these will be available to pay the creditor’s claims. may be “clawed back” into the estate and used to pay creditors with valid claims.
The Administration of both Probate and Trust estates is complex, time-consuming, and subject to many controlling laws. Particularly at a time when the designated Representative may be grieving the loss of the decedent, experience legal assistance may be a must. For over 20 years, the attorneys of BPE Law Group, P.C. have been assisting our clients and their family members and other representatives with their real estate, business, and Estate Administration needs. If you have questions concerning this Article or have need for legal assistance, please either call our main office at 916-966-2260 to arrange a consultation or email your questions to Keith at kbdunnagan@bpelaw.com or Steve at sjbeede@bpelaw.com.
This article is not intended to be legal advice, lending advice, or a specific recommendation of any particular lender or company, and should not be taken as such advice.