If you have recently lost a family member or loved one you are undoubtedly grieving the loss. The last thing you probably want to worry about is debts and calls from debt collectors; however, you may have to if you are involved in the probate of the decedent’s estate. If you have never been through the probate process you likely have no idea how debts of the decedent are handled. Because every estate is unique it is always best to consult with an experienced New York estate planning attorney regarding specific questions or concerns; however, a basic understanding of how creditors of an estate are treated during probate may also be helpful.
Shortly after the decedent’s death the Executor of the estate (if a Last Will and Testament was left behind) or the Personal Representative (if no Will was left behind) will begin the probate of the estate. One of the first tasks that must be accomplished during probate is to notify creditors of the estate that probate has been initiated. Notification is done personally or by publication, depending on the type of creditor. Creditors then have a specific time period (in most states 6 months) within which a claim against the estate must be filed.
The Executor/PR then reviews the claims that are filed and approves or denies each claim. Approved claims are paid out of the estate assets. Creditors whose claims are denied may have the option to litigate the claim. If the estate lacks liquid assets, estate assets will likely have to be sold to pay creditors. If the estate still does not have sufficient assets, claims are prioritized as follows:
2. Secured debts such as a mortgage
3. Unsecured debts (credit cards, utilities bills, personal loans)
Debts owed to the U.S. government must always be paid before any assets can be transferred out of the estate. Once all of the claims are paid, the remaining assets may be transferred to the intended beneficiaries or heirs of the estate.
Fortunately, some assets of the estate will likely be exempt from creditor claims. State law determines which assets, if any, are out of the reach of creditors. The most common exemption is for the decedent’s homestead, though there is usually a cap to the amount exempted.
If you have additional questions or concerns about probate, or estate planning in general, contact the experienced New York estate planning attorneys at The Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.