Probate Court Creditor's Claim

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The overarching goal of probate is to settle an estate when a person dies. At first glance, this seems straightforward-total up the assets, pay the debts (including taxes), and distribute what remains to the heirs. Unfortunately, matters are rarely so simple and often you need an Oakland probate lawyer to help you through probate litigation. Disputes arise to thwart a smooth transition and finalization of financial and legal matters.

Time Limits

There are several milestones or time limits set by California statute governing when claims must be filed to receive consideration by the court. With few exceptions, all claims must be filed within a year of the death. In general, this absolute limit supersedes other "clocks" set in law for claims to be brought. So, for example, a claim for damages arising from an automobile accident might have a two-year limit, if the defendant dies, the shorter probate limits come into effect.

The relevant statute, amended in 2012, shortens the time to file a claim (keeping the one-year absolute limit in mind) to the later of 60 days from when a creditor receives notice of a death, or four months from when an administrator of the estate is appointed. This appointment is called "receiving letters," reflecting acknowledgement by the court of a duly appointed executor or personal representative for the estate.

Exceptions to the Rules

Exceptions to the year limit can arise when an obligation isn't clarified until the deadline has passed, but this is unusual. An example might be an estate that wasn't probated and where the distribution was never clarified. Heirs may not even find out about an asset until the time has expired, or someone can assume there is an understanding among beneficiaries that only is revealed to be mistaken much later.

For this reason, creditors may wish to have the clear statement of asset distribution that a court provides through probate, even when a debt is not initially disputed. Suppose one family member takes a family heirloom because, "Dad always wanted me to have it." Much later, even after the year limit has expired, the heirloom is found to be quite valuable and other heirs believe they have a claim to a share of the value. If the item wasn't part of the probate process, actual ownership may be unclear and this would be cause for litigation, even after the deadline.

Probate vs. Trust

A probate action may be brought by a creditor, and in fact, probate may be started solely because a creditor wants to make a claim against an estate. Only that part of the estate not protected by a trust is subject to probate and accessible to creditors, unless their agreement with the decedent stipulated an agreement with the trust as well.

Clever creditors, who know a trust is in play, will ask the debtor to sign obligation agreements both as an individual and again as the trustor of the trust. This makes the trust obliged to pay and prevents shielding from payment should the trustor die and, as such, the successor trustor assumes the debt. If the trust is revocable at the time of the death, the trust is liable for debts, but only after the rest of the estate has gone through probate. In other words, the probated part of the estate pays the bills first, and only afterward can a trust be attacked for any remaining debt. This also depends on the type of trust.

Avoiding Probate Problems as a Creditor

You are entitled to receive notice of a death and be given a chance to file a claim with the court. Notice has to be published in a newspaper of record and an attempt has to be made to contact all creditors directly (by mail).

From there, follow these steps:

  • Upon receiving notice, a claim should be filed within 60 days to make sure the claim is recognized. Filing is done by submitting a form to the probate court.
  • If you did not receive notice but discover the death, file immediately-there is a four month time limit from when "letters" are issued.
  • If no notice was received and you were unaware a death had occurred until after this time, you will have to petition the judge to evaluate the circumstances and decide whether a claim can still be made. Consult an attorney for how to proceed.

What Steps to Take Next

Make a timely claim. This may require the claimant opening a probate case so there is a venue to file the claim in. For disputed claims, you may have to bring a legal proceeding against the estate. Be prepared to prove the claim has merit and the amount claimed is accurate. The court will require such proofs when the claim is filed.

When the claim has not been memorialized in writing, and when the heirs are cooperative, the debt should be acknowledged by them and certified, along with payment terms or a promise to resolve the issue.

While there are nuances and complications not mentioned above, the general flow is as follows:

  • A death occurs.
  • An administrator is appointed.
  • Creditors are notified of the death.
  • Claims are filed against the estate.
  • A probate proceeding then sorts out all the assets and liabilities of the estate.
  • They then make final rulings about who gets what - including creditors and heirs.

If you have questions about a probate court creditor's claim, contact me. I am an Alameda County probate lawyer and I can help.

Contact the Law Office of Steven M. Simrin

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