Part of the estate administration process is taking steps to ensure that debts of the estate are verified and paid. That is why the creditor claims process is such an important part of probate. Let’s take a look at what this process looks like.
Creditor Claims During Estate Administration
In Pennsylvania, a person or entity who is owed money by the decedent prior to their death is considered to be a creditor with a claim against the estate. State law requires the personal representative of the estate to put creditors on notice of the estate administration proceedings. While sending direct notice to creditors is not required, the personal representative is required to publish notice. The publishing of notice regarding estate administration is what begins the clock running on the deadline for creditors to file claims against the estate.
Creditors have one year from the Notice of Administration publication to file their claims. Failure to file their claim in a timely manner means that a creditor risks nonpayment of their claim. At that point, assets from the estate may have already been distributed. The creditor, therefore, would only be able to recover from any estate assets that had yet to be distributed.
A creditor against an estate files a claim by providing the personal representative of the estate with written notice. This can be done by submitting a completed Notice of Claim form with the court register. The filing of a claim preserves the creditor’s right to collect from the estate. If the creditor claim proves valid, then the personal representative of the estate can go ahead and pay the claim from the estate should there be sufficient assets to cover the claim. If the claim is not paid in full by the personal representative, then the court can assess the creditor claim during an estate audit. The creditor will receive notice of the audit and can then present their claim to the court. It is common for a creditor to not pursue the claim during the audit. As a result, the claim is dismissed and the creditor will not recover anything further from the estate.
Alternately, if a creditor claim is not paid in full by the estate, a creditor can try to pursue full paying of the claim through direct action. To do so, the creditor files an action against the distributees of the estate or the personal representative of the estate. If the personal representative made distributions from the estate within one year of publishing notice of administration proceedings to creditors, then the personal representative can be held liable for the payment of their claim.
Estate Planning Attorneys
Do you need assistance untangling to complications of probate proceedings? Do you want an estate plan that spares your loved ones the need to go through the frustrating and often draining probate process? Jones, Gregg, Creehan & Gerace is here to help. Contact us today.