When a person passes away, their estate does not just include assets to be distributed to heirs; it may also involve debts that need settling. If you are the executor of your loved one’s estate, handling debts will be your responsibility.
Creditor claims in probate are an essential aspect of the estate settlement process. They help ensure that you settle your loved one’s financial obligations before distributing the remaining assets to beneficiaries.
Therefore, it is crucial to understand what creditor claims are and how to handle them effectively.
What are creditor claims?
Once your loved one dies, one of your first responsibilities as executor is to notify known and unknown creditors of their death. Afterward, creditors have one year to make claims for repayment, according to Massachusetts law.
Essentially, creditor claims are formal demands for payment. These claims can come from various sources, including:
- Credit card companies
- Mortgage lenders
- Medical providers
- Personal lenders
- Utility companies
- Judgment creditors from prior lawsuits
A creditor claim usually involves relevant information about the debt, such as creditor information, the claim amount and the nature of the debt.
How can creditor claims affect probate?
Creditor claims can disrupt probate in several ways. For one, you cannot distribute the estate until you settle all valid creditor claims. Moreover, you must pay these claims from the estate’s assets, which will likely reduce the overall value of the estate.
Probate is often an already long and expensive process. That said, creditor claims can make probate even more costly and time-consuming.
How can you reduce the impact of creditor claims?
Creditor claims are often unavoidable, but there are several ways to lessen their impact:
- Prompt notification: Notify creditors quickly to start the claim period as soon as possible.
- Thorough asset inventory: Conduct a comprehensive inventory of the estate assets early. Doing so can help you understand the estate’s financial position.
- Debt verification: Carefully review all claims for validity and accuracy. Request supporting documentation for questionable claims.
- Negotiate with creditors: If appropriate, try to negotiate reduced settlements, especially for large debts. Consider offering lump-sum payments in exchange for partial debt forgiveness.
These are not the only strategies you can employ, but they can be a great start. Moreover, you may want to consult a probate litigation attorney. They can help you understand state probate laws and handle problematic creditors if needed.
With preparation and legal guidance, it is possible to minimize the negative impact of creditor claims on the estate. As a result, you may have better chances of preserving assets for beneficiaries and even streamlining the probate process.
