What To Do if Probate Reveals Unexpected Debt or Claims in California
When someone passes away in California, their estate goes through probate. This process aims to ensure the decedent’s estate assets are divided according to their will (if they left one behind) and their debts are properly managed. However, as the executor or administrator, you might not know all the debts the deceased owed. Discovering debts you did not know existed can cause anxiety and confusion during an already stressful situation. So, what happens if, during the probate process, you discover debts or creditor claims you did not know existed? In the following sections of this article, we discuss what to do if probate reveals unexpected debt or claims in California.
The Role of the Executor or Administrator
As the executor of a decedent’s estate, California law requires you to notify creditors and settle genuine claims before distributing any assets to beneficiaries. According to California law, you are required to provide formal notice to all known or reasonably ascertainable creditors of the probate process within four months after the issuance of letters or thirty days after you become aware of the creditor, whichever is later. Failure to provide a timely notice can make you liable for any resulting losses.
Once you have provided notice to creditors and claims have been filed, you must evaluate all claims carefully and handle them according to the state’s probate law. This includes even those debts that you did not know existed. You cannot ignore unexpected debts. Doing so can result in you being held personally liable for them.
What if Unexpected Debts or Claims Surface?
In California, it is not uncommon for unexpected debts or claims to surface during the probate process. Here is what to do when this happens;
- Verify the Debt(s)
The first step is to review and verify the legitimacy of the debt or claim. Contact the alleged creditor(s) and request documentation relating to the debt(s). Ensure you verify the nature of the debt and the amount owed. Next, check whether the claim was filed on time. Under California Probate section 9100, creditors are generally required to file their claims by the later of four months after the letters are issued to a personal representative, or 60 days after the day the notice is mailed or personally delivered to them. You have the right to reject late creditor claims.
If you believe a claim is not legitimate, you can formally object to it in court.
- Determine if There Are Enough Assets
Once you have reviewed and verified all debts, including unexpected ones, you need to confirm whether the estate has enough assets. If it does, you must pay valid debts in order of priority as outlined in California Probate Code section 11420.
If the estate does not have enough money to cover all debts, you must pay debts in the statutory order until the money runs out. In such a case, beneficiaries can expect to lose at least a portion of their inheritance or not receive any inheritance.
So, once you have determined whether or not there are enough assets, you need to communicate with beneficiaries, especially if debt payments will reduce or eliminate inheritances.
Tip: Consider negotiating with creditors, as some may be willing to settle for less than the full amount. Negotiations can help preserve assets for beneficiaries.
Contact The Probate Guy
For help handling debts during probate, contact the experienced California probate attorney, Robert L. Cohen – The Probate Guy – today to schedule a telephonic consultation.
Southern California Probate Lawyer Serving Orange, Riverside, Anaheim, Whittier & Beyond.
Source:
leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB§ionNum=9100.
