When it comes to leaving behind a legacy for your family and friends, estate planning is often the most powerful way to ensure your wishes are followed. But that plan has to be robust, and it has to account for every part of your financial life. Otherwise, creditors can make claims on your estate, and potentially keep your beneficiaries from receiving what was bequeathed to them.
Who Can Make a Creditor’s Claim Against Your Estate?
It may surprise some to learn that beneficiaries aren’t first in line when it comes to distributing an estate. Secured creditors, persons with property interests and claims against insurance policies are often first served. These individuals don’t even have to file a claim with the probate proceeding or the trust administrator. Their interests are met when an insurance policy pays out, foreclosure actions are finished and property ownership petitions are settled.
Next in line are administrative costs and court fees. Then, before the estates beneficiaries, comes the decedent’s creditors. These individuals must file a creditor’s claim with trust administration or a probate proceeding if they are seeking payment from the estate. They must also file these claims in a timely fashion or run the risk of their claim becoming unenforceable.
How Are Creditor’s Claims Handled?
In the first four months of starting a probate proceeding, the decedent’s representative reaches out to all the creditors who can reasonably be found. The representative sends creditor’s claim forms which must be returned in at least in sixty days or by the end of the first four months. Once the claim is filed, the representative has 90 days to either accept, partially accept or deny the claim. If the decedent’s estate is not large enough to handle the creditor’s claims against it, the California court must be consulted for guidance.
This process can be long and taxing but planning ahead can help minimize or even avoid it. Accounting for creditors and administrative costs through planning focuses you on your estate’s needs. It will allow you to pay down or eliminate these debts before they can consume your legacy. To learn more about keeping creditors from consuming your estate, contact an experienced estate attorney at Temmerman, Cilley & Kohlmann, LLP.