What Happens if Creditors Aren’t Notified of a Probate Case?
You can’t take it with you—and in addition to leaving your money behind, chances are you’ll leave some unpaid bills behind, too. What happens to your debts after you die?
The short answer is that they get paid out of your probate estate according to a priority established by Ohio law. Creditors must present a claim within 6 months of the date of death, after which time the executor or administrator of the estate has thirty days to reject or allow the claim.
In many states, the executor or administrator of the estate is required to give notice to creditors of the deceased. If there are known creditors, they must be notified directly, while an advertisement is placed in legal newspapers to provide notice to unknown creditors. However, in Ohio, there is generally no such notice requirement. That said, there are a few exceptions to that rule.
When Must an Ohio Personal Representative Make a Notice to Creditors of Probate?
The first situation in which an Ohio personal representative must publish notice of a death to creditors is when an estate has been released from administration. Release from administration is available for small estates valued at less than $35,000, or those in which the estate is valued at less than $100,000 and the entire estate goes to the decedent’s spouse.
The second scenario in which a personal representative of an Ohio estate is required to notify the estate’s creditors of the death is when the personal representative has a claim against the estate in an amount of $500 or more. Because there must be a hearing on that claim, any other potential creditors are required to be notified of the hearing.
In the two situations described above, publication of notice in a legal newspaper is sufficient to meet legal requirements. The third circumstance in which a personal representative must give notice of a death is when a lawsuit was filed against the deceased in an Ohio court prior to their death. In that case, the personal representative must directly notify the court in which the lawsuit is pending of the death. Notice in this case must be given promptly: within 10 days of the personal representative learning of the pending lawsuit .
Can a Creditor Open Probate?
You may have noted that a creditor has six months from the decedent’s death to present a claim against the estate—not six months from the opening of the probate estate. That’s an important distinction. Theoretically, the family of the deceased could wait months to open a probate estate, so that there would technically be no administrator to whom a creditor could present a claim during that time. If they waited longer than six months to open the estate, claims against the estate would effectively be barred.
To prevent this outcome, Ohio law permits creditors to administer a decedent’s estate under certain circumstances. A spouse or next of kin have first priority to serve as administrator if the deceased died without a will; if there was a will, the executor named in the will is typically appointed. But if no one with priority applies to serve as administrator “within a reasonable time,” the court can appoint a “suitable person,” including a creditor.
Theoretically, this provision in the law protects creditors: if there is no administrator to whom they can present a claim, the creditor can apply to be the administrator of the estate. Any other creditors would then have someone to whom to present their own claims. In practice, it is unclear how often this happens. Many creditors simply do not have the bandwidth to monitor whether any of their debtors have passed away, or to leap into action and petition to become an administrator at the appropriate moment if no one else steps up.
Should a Personal Representative Notify Creditors of Probate?
Given the information above, it might seem unwise from the perspective of heirs for the personal representative to notify creditors of probate, and their dwindling time to present a claim. It might seem to make more sense to “run the clock out” and hope that creditors don’t make their claim in time.
On the other hand, opening an estate and notifying creditors of a death might make sense for a spouse or next of kin of the deceased. For one thing, if a family member petitions the probate court to serve as executor or administrator, they control the management of the estate. Waiting to open the estate could leave the estate’s business in the control of whatever “suitable person” the court might eventually appoint.
In addition, giving proper notice to creditors means that the time for presentment of claims by those creditors is shortened significantly. A creditor who has been given proper notice of a death has to present their claim within thirty days of the notice or six months of the death, whichever is sooner. Accordingly, probate creditors’ claims can be dealt with more quickly and certainly, and the estate may be able to be closed sooner.
If you have questions about creditors’ claims in probate, contact Gudorf Law Group to schedule a consultation.