The personal representative (a/k/a administrator or executor) of a probate estate owes a duty to beneficiaries and creditors. A personal representative must follow specific rules to avoid becoming personally liable and to safeguard assets. When someone dies, the process of paying their bills is much more complicated than when they were living. Here are the steps you will need to follow to legally and effectively manage estate debts:
Identify Creditors
The first step is to identify the decedent’s creditors. Conduct a diligent search to determine valid debts that the deceased had by:
- Checking their mail
- Checking emails from creditors
- Reviewing bank statements for automated payments
- Obtaining electronic assets to the decedent’s bank and credit card accounts
- Forwarding mail to your address
- Inquiring with those familiar with the decedent’s financial situation and obligations, such as their spouse, children, attorney, certified public accountant, or financial advisor
- Searching public records for mortgages, liens, and other filings
This thorough process can help you identify entities or individuals with valid claims against the estate. However, you should not immediately begin paying these debts. Florida has a particular order of priority when paying debts, and certain debts may not be valid. If you do not follow this priority and the estate has insufficient assets to pay all creditors, you could end up responsible for not following the rules.
Publish a Notice to Creditors
After the probate case is opened and the court formally appoints the personal representative, Florida law requires the personal representative to publish a notice to creditors in a local newspaper in the county where the decedent died for two consecutive weeks. This important notice begins a three-month period in which creditors can make claims against the estate.
Send Written Notice to Creditors
Personal representatives must send written notice to known or reasonably ascertainable creditors, in addition to the newspaper publication. The creditor has 30 days from receiving notice to file a claim with the estate or their claim can be forever barred.
Review Claims
Just because a creditor submits a claim does not mean it is valid. The personal representative must review claims to determine if they are valid. If they are not valid, they can object to it. If they are valid, they can include it in a list of bills to pay if the estate is solvent.
Object to Invalid Claims
Personal representatives can object to submitted claims that are invalid. These claims may be invalid for different reasons. For example, creditors may have submitted claims after the applicable deadlines. The estate may contest that the decedent owed the debt. Florida also has a statute that bars all probate claims (except for recorded mortgages and certain other debts) filed two years after the decedent’s death, regardless of whether they were a known creditor and received notification.
Assets Exempt from Creditors
It’s important to note too that certain assets may be exempt from unsecured creditor claims (such as credit cards, medical bills, personal judgments, etc.) even if the two-year creditor period has yet to expire. These assets include:
- The deceased’s homestead property (i.e., primary residence)
- Household furnishings, appliances, and furniture in the deceased’ home up to $20,000 in value
- Two motor vehicles (each not to exceed 15,000 pounds)
- Prepaid college tuition
Pay Valid Claims
The personal representative is responsible for paying from the estate all valid creditor claims within one year from the first date of notice to creditors was published. If there are not enough probate assets to cover all valid claims, they must be paid in the following order of priority:
- Probate and administration expenses, including attorney’s fees
- Reasonable funeral and burial expenses not to exceed $6,000
- Debts, taxes, court costs, and other claims owed to the government
- Reasonable and necessary medical and hospital expenses of the decedent for the last 60 days
- Family allowance
- Court-ordered child support
- Debts acquired after the death by continuing the decedent’s business
- All other claims
All claims of one class must be paid before claims of the next class. If all claims in a class cannot be paid due to insufficient estate assets, the debts must be paid pro rata based on the value of the claims.
Stay Organized
Managing an estate can be taxing and take considerable time. Keep detailed records, statements, and communications in an organized folder. Use a spreadsheet to track payment of claims.
Contact Farshchian Law for Help
Our experienced Florida probate and real estate attorneys are here to guide you through the probate process. We can help you identify creditors, fulfill your legal requirements for notifying creditors, and explain which debts must be paid.
Call us at (855) 513-5880 or email us via our secure online contact form to schedule a free consultation. We provide probate, real estate, and title/closing services throughout the State of Florida.