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Ensuring You Pay All Debts During Probate

On Behalf of | Jun 15, 2023 | Probate |

Probate involves administering the estate of a deceased person and resolving their financial obligations. During the probate process, you address and settle any outstanding debts to ensure a smooth and fair distribution of assets to beneficiaries.

Learn more about the steps you can take to ensure you pay all debts properly during probate.

Identify and notify creditors

The first step in ensuring you pay all debts during probate is to identify and notify creditors of the deceased person’s passing. As the executor or personal representative, it is your responsibility to notify creditors and provide them with the necessary information, such as the date of death and your contact details. This allows creditors to come forward and make a claim against the estate for the debts owed to them. In California there is a particular form and strict time limits for such notifications. Creditors are also notified in a California probate in the form of the newspaper notice a petitioner is required to file before starting a probate. Many large financial institutions have staff who review these newspaper notices in order to file creditors’ claims.

Review and verify claims

Once you have notified the creditors, it is crucial to review and verify the legitimacy of their claims. You may want to request supporting documentation from creditors, such as invoices, contracts or statements, to verify the amount owed. This is especially advisable with credit card debt, because sometimes unscrupulous people will use a decedent’s credit card after death. If that happens, you, as personal representative, can automatically refuse to pay any charges that occurred after death (except that sometimes automated charges may still be legitimate). Also, creditors must follow a specific procedure in order to claim a debt owed and you, as the personal representative, may reject any claim that is not properly served and filed.

Negotiate and settle debts

In some cases, you may need to negotiate with creditors to reach a settlement or repayment agreement. Work with creditors to negotiate favorable terms, such as reduced amounts or extended payment plans, especially if the estate lacks sufficient funds to cover all debts in full.

Liquidate assets if needed

If the estate does not have enough liquid funds to cover all outstanding debts, you may need to liquidate certain assets. Identify assets to sell to pay off the debts. This may involve selling real estate, vehicles or other valuable possessions. Another option, if the estate has real property, is to obtain a loan for the estate secured by real property (i.e., a mortgage).

Finalize the debt payment process

Obtain releases or acknowledgments from the creditors stating that you satisfied the debts. These documents serve as proof that the estate has fulfilled its obligations and the creditors no longer have any outstanding claims against the estate.

As the executor or personal representative, you can pay the estate’s debts properly and facilitate a smooth distribution of assets to beneficiaries.