The personal representative of an estate has many technical responsibilities. They must communicate with beneficiaries about the estate. They have to file paperwork with the probate courts. They need to keep records regarding how they distribute resources from the estate.
They also have an obligation to fulfill the deceased individual’s financial responsibilities. Personal representatives file income tax returns and pay appropriate taxes. They also have to address any personal debts that remain unpaid when someone dies.
What is the process for handling debts during estate administration?
Communicating with creditors
Personal representatives typically choose to notify creditors of the upcoming probate proceedings. Typically, they send direct written communication to known creditors about the estate. They also typically choose to publish notice in a local newspaper advising unknown creditors of the upcoming probate proceedings.
Without notice, creditors have up to 24 months to make a claim after the date of an individual’s death. With published notice, there is only a four-month window of time to request repayment during probate proceedings. After receiving notice, creditors have to submit claims to the courts following the appropriate process if they want to receive repayment.
Settling debts with estate resources
After creditors have submitted claims, the personal representative needs to use estate resources to pay the debts in the right order. Certain debts, including probate expenses, take priority over other debts, like credit card balances.
If the estate does not have enough resources to pay all of the valid debts, the personal representative must pay the highest priority debts and liquidate estate resources to facilitate that process if necessary. Creditor claims take priority over the rights of beneficiaries and heirs, which might mean that no one inherits anything from the estate.
Small mistakes in the process of notifying and paying creditors might lead to personal liability for the representative. If they improperly distribute assets, they might be personally responsible for the inappropriate distribution of resources. It is therefore of the utmost importance for those handling estate administration to follow the right procedures and to keep clear records to protect themselves from liability.
Understanding the responsibilities inherent in estate administration can help representatives avoid potential pitfalls. Many people require support during estate administration to avoid mistakes and oversights, and that’s okay.