How to Handle Creditors’ Claims
as an Executor or Trustee
May 9, 2022
When a person dies, the personal representative or executor will settle the decedent's final affairs and distribute assets to the heirs and beneficiaries. However, prior to that, the executor must pay all debts and taxes. Depending on the estate's size and the number of creditors, handling creditor's claims during estate administration can be tedious. A knowledgeable California estate planning attorney can enlighten you about how to handle creditors' claims and guide you through the estate administration process.
At the Law Office of Rodney Gould, Attorney Rodney Gould is committed to offering experienced legal guidance and reliable advocacy to clients in estate administration-related matters, including debt payments. He's available to discuss your unique situation, help handle creditors' claims, and assist you with outstanding debts. The firm proudly serves clients across Los Angeles, Sherman Oaks, West Hollywood, Studio City, and Beverly Hills, California.
The Role of Trustee/Executor to Notify/Search for Claimants
In California, one of the responsibilities of the trustee or executor of an estate is to notify creditors of the trust settlement or probate proceedings. Once the trustee or executor files a probate proceeding for the estate, they must publish a notice to creditors.
A notice to creditors can be described as a public notice of the trust settlement or probate proceeding published in the local newspaper with a wide reach. The notice will be addressed to all debtors and creditors of the decedent's estate.
Under California Probate Code Section 19041, here are some important requirements for publishing a notice to creditors in the state:
A notice to creditors must be published for at least 15 days.
At least three publications must be posted in a local newspaper published once a week.
There must be at least a five-day interval between any two publication dates.
A notice to creditors must be published in a newspaper of general circulation in the city and county in the state where the decedent lived prior to their death.
An affidavit showing the due publication of notice to creditors must be filed with the court clerk upon completion of the publication.
An experienced attorney can guide you through the process of publishing notice to creditors and enlighten you about the creditor's timeline for filing a claim and the payment of valid claims.
Creditor's Time Limits for Filing a Claim
In California, creditors of a deceased person's estate will have up to one year from the date of the decedent's death to file a creditor claim. However, once a personal representative or executor is officially appointed for the decedent's estate, a creditor must file a claim by the later of the following times:
Four months after the date the letters are first issued, appointing a general personal representative.
Sixty days after the date, the notice of administration is mailed or personally delivered to the creditor.
Payment of Claims
Once the executor receives claims from creditors, they must evaluate and investigate each claim to determine its accuracy and validity. All valid claims may be paid using the available estate's assets, finances, or funds in the checking account. All records of valid claims paid must be properly documented.
Disallowance of Claim
Conversely, claims that seem incorrect or invalid may be denied. If a claim is denied, the creditor will have up to 90 days to dispute the claim's denial.
Order of Payment of Expenses and Claims
According to California Probate Code Section 9653 (c), expenses and creditor claims may be settled using the following order:
First, the payment of the costs and expenses of the suit, including attorney's fees.
Next, the payment of the debts of the decedent.
Handling Creditors' Claims as a Trustee
However, how creditors' claims are handled by the trustee will depend on the type of trust. A revocable trust — a trust that can be changed or canceled – doesn't protect the trust assets from creditor claims or lawsuits. For legal purposes, the trustor will still be treated as the owner of the trust assets. Therefore, trust assets may be used to settle creditors' claims.
Conversely, an irrevocable trust can protect the trust assets against claims and lawsuits. When you establish an irrevocable trust, it cannot be altered or revoked. Assets in the irrevocable trust are shielded from creditor claims and lawsuits against the trustor. Thus, the trustee cannot use trust assets to pay creditors' claims or debts. An experienced California trust administration attorney can guide you through the trust settlement process and help you handle creditor claims appropriately.
Legal Guidance You Can Trust
Handling creditor claims as the executor of an estate often involves a lot of complexities. Publishing a notice, reviewing and determining valid claims from creditors, paying outstanding debts, and settling claimants can make the entire process even more daunting. Therefore, getting detailed legal guidance from an experienced estate administration attorney is crucial to navigating intelligent decisions when handling creditors' claims.
Attorney Rodney Gould has devoted his career to offering outstanding legal services and helping executors and trustees navigate the complexities of probate, estate administration, and trust settlements.
Also, Attorney Rodney Gould can craft a detailed checklist to guide you through the probate or trust administration process and help distribute assets to rightful beneficiaries seamlessly.
Contact the Law Office of Rodney Gould today to schedule a simple case assessment with a trusted probate lawyer. Attorney Rodney Gould can offer you the detailed legal counsel, assistance, and brilliant advocacy you need to navigate crucial decisions. The firm is proud to serve clients across Los Angeles, Sherman Oaks, West Hollywood, Studio City, and Beverly Hills, California.