How to Handle Creditors’ Claims as an Executor or Trustee
Someone who passed away may have left a will that appoints an executor or created a trust that appoints a trustee to manage their affairs. One of the many responsibilities executors and trustees have is to handle creditors’ claims. This can be a difficult process, but with the right knowledge, it can be done efficiently and effectively.
If you were appointed as the executor of someone’s estate or named as a trustee, you might need the assistance of a knowledgeable estate planning attorney when handling creditors’ claims. Our attorney at Engel Professional Association helps executors and trustees complete their appointed duties while also making sure that the deceased’s wishes are upheld.
With an office in Minneapolis, Minnesota, we provide legal assistance to those appointed as executors and trustees in St. Paul and other parts of Minnesota, including Maple Grove, Mankato, Woodbury, and St. Cloud.
The Role of Trustees/Executors to Notify/Search for Claimants
Both executors and trustees are what are known as fiduciaries. Fiduciaries can have a number of duties and responsibilities, including but not limited to notifying and searching for potential claimants and handling creditors’ claims.
When the deceased’s estate goes through probate, the executor is required to inform potential creditors of the decedent’s death. Minnesota law requires executors of an estate to publish a notice to creditors in a legal newspaper in the county where the settlement of the estate takes place. The law requires a notice to be published once a week for two successive weeks. The notice informs creditors of their right to bring claims against the estate within four months of the date the executor was appointed.
The executor is also required to provide a copy of the notice to any known creditors within three months of the date when the first notice was published. The same timeframe also applies to notifying any creditors discovered through a reasonably diligent search. However, there is no requirement for this notification for creditors that have already contacted the executor and creditors whose debts have been paid.
Payment of Claims
The executor or trustee must make sure all valid debts are paid in full before distributing any assets to heirs. All creditors must be notified of the estate so that each creditor has a chance to submit a claim. Once all claims have been received, they must be assessed and verified before payment is made. It is important that payment of each claim is handled carefully and accurately. If not, the executor or trustee may be held liable for any mistakes or omissions on this part.
Disallowance of Claims
Not all claimed debts are valid. Some may actually be fraudulent attempts by people trying to take advantage of the executor or trustee’s lack of knowledge or experience. It is important that the executor or trustee thoroughly investigate each claim and only allow those which are legitimate. If a debt appears suspicious, further investigation can be conducted before deciding whether it should be honored by the estate. When necessary, they should consult with an attorney for assistance in assessing the validity of creditors’ claims.
Order of Payment of Expenses and Claims
Once valid debts have been identified, they must then be prioritized for payment in accordance with state law. Generally speaking, any outstanding taxes should take precedence over other debts, including income tax returns due at the time of death as well as any taxes due from prior years.
After taxes have been paid, other administrative expenses such as legal fees should also take precedence over other debts owed by the estate. Finally, after all administrative expenses have been paid off, the remaining funds can then be distributed among the legitimate creditors who have submitted claims against the estate.
However, the order of payment of expenses and claims may differ depending on state law and the individual circumstances of the deceased’s estate. That is why you might want to consult with an experienced attorney to get help in handling creditors’ claims.
Turn to Engel Professional Association for Help
If you were appointed as an executor of someone’s estate or a trustee, you have certain duties and responsibilities you must fulfill. One of those is the responsibility to handle creditors’ claims. However, handling creditors’ claims on your own can be a challenging and risky endeavor, which is why you might need the assistance of a skilled attorney at Engel Professional Association. Reach out to our office to schedule an appointment and discuss your case.