How to Handle Creditors’ Claims As an Executor Or Trustee in California

Losing a loved one is difficult enough without legal complications adding stress to your situation. My name is Amy Fike Peters, and my practice is called Estate Preservation Group. I’m on a mission to help families throughout North San Diego County establish their estate plan so their heirs can avoid probate. I also work with clients after the death of a loved one in the administration of the loved one’s trust in trust administration to make it easy as possible to get through this difficult time and transition property as designated.

In this article, I will share useful information about paying how to pay off your loved one’s creditors after their passing. If, after reviewing this information, you have questions about probate, trust administration, or a related concern, please call me to schedule a free consultation.

Estate Administration & Creditor Claims

When a person passes away, the state of California looks to their estate plan to determine what should happen with their properties, possessions, finances, businesses, and assets. If the deceased person only left a will, and the estate exceeds $150,000 or real property over $50,000, the named executor must open a case in the probate division of the County Superior Court in order to dispose of property and settle debts pursuant to a final court adjudication. If, however, the deceased person had established a trust, the distribution of property is seamless and is performed by the person named as the trustee without the court taking jurisdiction over the process.

Executor Responsibilities

The executor not only must oversee the probate court proceeding, but is responsible for notifying any known or “reasonably ascertainable” creditors of the deceased so creditors can make an appearance to register their debts and be paid before the court determines asset distribution.

While “known creditors” are generally easy to track down (think credit card companies, doctors’ offices, and other businesses on the collection side of an outstanding bill), it requires public notice and digging to discover any “reasonably ascertainable creditors.” For instance, it was estimated that approximately 12% of deceased debt holders had unpaid personal loans in 2017. These are the kinds of debts that are easy to miss without the guidance of an experienced lawyer.

Trustee Responsibilities

If you have been named a trustee, you may not be bound by California law to notify creditors that you’re about to begin the trust administration process. However, doing so might actually improve your chances of avoiding legal complications and minimize the debts owed to creditors. A seasoned trust administration attorney can help you decide how best to handle your individual situation.

How to Settle Debt During Estate Administration

The steps involved in repaying creditors as an executor or trustee vary from state to state. It’s always best to consult with an experienced attorney to prevent unnecessary legal or financial consequences. For reference, this is how the debt repayment process typically unfolds in California:

1. You notify creditors. As the deceased’s personal representative (that is, their executor or trustee), it is up to you to notify any known or potential creditors that the person has passed away. If you fail to do so, you could be held liable for any legitimate debts that go unpaid.
2. Creditors make their claims. Once you’ve notified the creditors, it is up to them to respond with a claim that specifies how much they calculate is owed to them.
3. You approve or dispute each claim. As creditors send in their claims, you must review each one to determine whether the claim seems legitimate and accurate.
   • For claims that appear correct, you simply repay those debts using what’s available from the estate.
   • For claims that appear fraudulent or incorrect, you can deny the claim, at which point the creditor has 90 days to file suit if they want to pursue the claim further.

As you can imagine, your job as the executor or trustee can become complicated very quickly if you run into any creditor disputes during this process. An experienced attorney can not only assist in tracking down and notifying creditors, but she can also help you identify illegitimate claims, effectively combat those claims, advise you how to proceed if there isn’t enough money to cover valid claims, and fight to protect you from unfair creditor retaliation.

Legal Guidance for California Executors & Trustees

If you’ve been named the executor or trustee on behalf of a loved one legalities are probably the last thing you want to think about right now. This is a very difficult time and I am most sympathetic to your loss, but this responsibility cannot wait and so, it is the most important time to see out an experienced attorney. I am here to help and pride myself and my staff on establishing deep connections and personal relationships with our clients during these difficult times. To get started, please reach out today and schedule a free consultation.