What You Should Know About Creditor Claims in Probate
The probate process is, in essence, about distributing the deceased's assets to beneficiaries and heirs. But before that distribution can take place, creditors of the deceased are entitled to make claims against the estate and, if those claims are valid, have them paid out of estate funds. Here's what Ohio executors and heirs should know about creditor claims in probate.
How and When Are Claims Made?
Claims against the estate must be made (presented) within six months of the death of the deceased, regardless of whether a personal representative (an executor or administrator) has been appointed or whether the estate was not required to go through probate (known as summary release). Each claim must contain the claimant's address.
There are a few ways in which a claim can be presented under Ohio law:
- To the personal representative in writing;
- To the personal representative with a copy also being filed with the probate court;
- Sent in writing by ordinary mail addressed to the deceased, and actually received by the personal representative within six months of the death.
As you can imagine, many claims are made in this last way: creditors, likely unaware of the death of their debtor, send a regular bill or invoice to their address. With the exception of tax assessments, all presented claims must be allowed or rejected within thirty days of presentation.
Notifying Creditors of a Death
As a general rule, there is no requirement that Ohio executors or administrators publish a notice to creditors, but there are a few exceptions to this rule. If the estate has been released from administration, either because it is a small estate (under $35,000 in assets) or because there is less than $100,000 in assets, all going to a spouse, notice to creditors must be published. The notice must indicate that the estate has been requested to be released from probate administration.
The second circumstance in which publication to creditors is required is if the executor or administrator personally has a claim against the estate that exceeds $500. In this case, there must be a hearing on the claim, and other creditors are entitled to notice of this hearing. Heirs and beneficiaries must be notified as well.
Lastly, notice to creditors is required if there is a pending lawsuit against the decedent, at least if the lawsuit is filed in an Ohio court and was initiated prior to the death. Unlike the first two cases, in which a general notice may be filed in a legal newspaper, a personal representative of an estate is required to directly notify the court in which a lawsuit is pending of the death of a party. This notice must be made within ten days of the personal representative becoming aware that there was a pending lawsuit.
While a personal representative may not be required to notify creditors of the deceased, they may want to do so; giving actual notice to creditors can further limit the time they have to make a claim. If the personal representative notifies a potential claimant in writing that identifies the deceased and personal representative by name, gives the decedent's date of death, claims may be barred earlier than six months after death. The notice must include a requirement that the creditor present the personal representative with a written claim within thirty days of receiving the notice, or within six months after the decedent's death, whichever comes first.
Management of Claims Against the Estate
If claims are presented to the personal representative of the estate in a timely fashion, he or she is entitled to request satisfactory authentication of the claim, including that there are no offsets or counterclaims. The personal representative and the claimant can agree to submit any disputed claims to a panel of referees approved by the probate judge for adjudication. A personal representative may also apply to the court for permission to settle a disputed claim.
There is a specific order of payment for claims against an Ohio estate. If estate assets are exhausted in paying claims that have priority under this order, those payments act as a bar to the unpaid claims with lower priority.
Claims for Medicaid Estate Recovery
The above limitations on making claims against an estate is designed to provide certainty to heirs that a creditor will not appear after estate assets have been distributed and demand payment. The time limit for making a claim against an estate also helps assure that an estate will not need to remain open indefinitely, awaiting a claim.
There is one type of creditor to whom the above rules do not apply: the government, specifically the Medicaid estate recovery program. If a decedent received Medicaid benefits in order to pay for nursing home or other care, the program is entitled to recover some of the amount expended from the estate.
The person responsible for the estate of the deceased (typically an executor or administrator, but possibly a spouse) must submit a Medicaid estate recovery notice form, properly executed, to the administrator of the Medicaid estate recovery program. The administrator of the program, in turn, must make a claim against the estate within ninety days of receiving this notice, or within one year of the deceased's death, whichever is later.
Medicaid reimbursements can wipe out an estate's assets. In order to avoid this happening to your heirs, speak to an experienced Ohio estate planning and elder law attorney about Medicaid planning.
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