Small enough to care.
Creditors’ Claims in Probate
As an estate planning practitioner, I always discuss with clients the pros and cons of avoiding probate. Probate is the judicial process by which a decedent’s will is proved valid (or invalid) and her testate estate is administered. It can be expensive and time consuming, while some of the methods of avoidance are quick and in-expensive. However, what cannot be forgotten is that Florida’s probate procedures provide a remarkably efficient solution to the problem presented by the unresolved claims of a decedent’s creditors.
Consider the situation faced by Sue Jones. Her mother died when she was young and her father, who was quite wealthy, just passed away. All of his wealth passed, through his will, to Sue. He also named her as his personal representative. Sue, about to enroll at an expensive private university, is in desperate need of her inheritance.
There is, as always, a wrinkle. Dear old dad was something of a “wheeler and dealer” and always very cagey about his financial affairs. Sue recalls seeing stacks of unopened envelopes on her father’s desk. Who did he owe money too? How long will she have to wait to get her inheritance? Could someone else claim a piece of it?
To answer this riddle, we must first ask what happens if someone dies with unpaid debts and there is no probate. Section 733.710, Florida Statutes, states that with the exception of mortgages and perfected security interests in personal property (for instance, a lien on the decedent’s car), “2 years after the death of a person, neither the decedent’s estate, the personal representative, if any, nor the beneficiaries shall be liable for any claim or cause of action against the decedent[.]” 2 years is a long time for Sue to hold her breath!
Probating her father’s estate, if done properly, addresses this problem. One of the first duties of a decedent’s personal representative is, as stated in Section 733.701, to prepare, publish and serve a notice to creditors. This notice lists, among other things, the decedent’s name, the probate case number and the name and address of the personal representative and her attorney. Section 733.2121(1). It must be published in a local newspaper once a week for 2 consecutive weeks. Section 733.2121(2). While the notice is being published, the personal representative must make a diligent search to identify the decedent’s creditors. Any creditor whose claim is known to the personal representative, or reasonable ascertainable, is entitled to personal delivery of the notice to creditors. Section 733.2121(3); Tulsa Prof. Collection Serv., Inc. v. Pope, 485 U.S. 478 (U.S. 1988). “[A] reasonably ascertainable creditor is one who can be determined by the personal representative through a diligent search.” Strulowitz v. Cadle Co., II, Inc., 839 So. 2d 876, 879 (Fla. 4th DCA 2003). Some of the items constituting a diligent search are:
- Examining all bills;
- Asking all credit card companies for final bills;
- Reviewing the decedent’s checking account to ascertain regular check payees;
- Inquiring of friends and family of the decedent;
- Obtaining a search for judgments from a title company;
- Asking known health care providers about others;
- Reviewing business records and inquiring of the decedent’s accountant, lawyer and business partners;
- Inquiring of insurance companies for the decedent to determine if the decedent has reported any potential claims; and
- Reviewing old tax returns to see about sources of income and payments.
18 Fla. Jur. 2d Decedents’ Property § 624 (Thomson Reuters 2017).
So long as the personal representative and her attorney have taken the proper steps with respect to the notice to creditors, heirs and beneficiaries can take solace because, but for a few limited exceptions (i.e. mortgage liens), “no claim or demand against the decedent’s estate that arose before the death of the decedent . . . is binding on the estate, on the personal representative, or on any beneficiary unless filed in the probate proceeding” not later than (A) 3 months after the time of first publication of the notice to creditors; or (B) as to any known or reasonably ascertainable claim, 30 days after service of a copy of the notice to creditors. Section 733.702(1).
Turning back to Sue, probating her dad’s estate would efficiently resolve the uncertainty surrounding her inheritance. The time by which her father’s creditors must “fish or cut bait” could be reduced from 2 years to as little as 30 days. While those may be 30 restless nights, it is preferable to 730 of them!
Post Date: February 3, 2017
By: Robert C. Chilton
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