Estate Planning: Handling Creditor Claims

Every state comes with its own rules and regulations on how the debts need to be paid.
The executor is required to notify the creditors that the person has passed away so that these creditors can lay claim for their payments. The way the notice is sent to the creditor varies from one state to another. As an executor, you might have to publish notices in the dailies or send letters of notification directly to the creditor.

• When Does the State Come In

  Once the executor notifies the creditors, they have to follow the rules that have been put in place by the state regarding asking for payment of their debts. For instance, the creditor might be required to lay claim in a certain period of time.
• Make It Easy for the Executor

  When preparing your estate plan, it is advisable that you come up with a list of creditors that shows their names, contacts and the amount of debt that you owe them.

  Keep on updating this list because cases have been reported of creditors claiming more than what you have listed down. The executor needs to be very careful because he might find himself settling debts if creditors don’t get paid.

  At times, you might find people masquerading as creditors with the aim of getting paid when they didn’t have any business with the deceased. The executor needs to be careful with such people.

  If the executor matches the claim to what has been listed on the documents, then they can pay the bill using part of the estate. On the other hand, the executor has the right to reject fraudulent claims, a process that might lead to lawsuits with the aim of getting payment made. This can lead to unwarranted expenses and a lot of delays.
• Determine the Value of the Estate in Line With the Debts

  Once the executor determines the number of valid claims that have been raised against the estate, he can go ahead and confirm whether there is enough in form of assets to pay off the debts. If the estate isn’t big enough to pay off the debts, then the estate is regarded to be insolvent.

  If the estate doesn’t provide enough money to pay the debts, then the beneficiaries won’t get anything.

  When determining who to pay first, you need to start with payment of taxes (federal and probate), then go to probate expenses, then funeral costs, illness costs and finally paying of general creditors.

  The best way to deal with creditor claims is through a qualified estate planning lawyer. The aim of the lawyer is to work closely with the accountant handling the estate then incorporates the debt payments into the estate plan. The lawyer refers the executor to trusted tax professionals to make sure nothing goes wrong.
• How Can You Avoid Claims on Your Estate?

  This is the question top on many people’s minds when they start planning their estate. One of the best ways to avoid contests on your property is to use a living trust.

  The living trust doesn’t mean that creditors will forego their money and leave the estate as it is, rather, they will have to substantiate that they have proof of an existing debt before they get paid their bills.

  The aim is to try and get the court to approve their payments. This takes longer and is more expensive, which means only the genuine creditors are willing to go through such a process.
• Reimbursement of Paid Bills

  For some people, once the family realizes that the deceased had debts, they go ahead and continue paying off creditors. This is true if the deceased made the debts known to the family members.

  If the family has settled some debts before the case goes to probate, the executor of the estate needs to reimburse them as required. However, his comes with a condition. If the deceased left the responsibility of refinancing mortgages and other debts to a beneficiary, then he shouldn’t be refunded.
• Mortgages

  A beneficiary who ends up with a real estate property will have to assume the existing mortgage during and after the probate case.
• In Closing

  When you have assets, make sure you meet with your estate planning lawyer to come up with all the debts that you owe. This makes it easier for your family to handle the claims after you are deceased. The list should include the name of the creditor, what you owe them and the repayment agreement.

The post Estate Planning: Handling Creditor Claims appeared first on New York Estate Planning Law Firm.

source https://trustsandestate.com/estate-planning-handling-creditor-claims/