Family members are often eager to ensure that their deceased family member’s bills are paid promptly after the decedent’s death. Understandably, they do not want creditors to stop services, close accounts, or sully the reputation of their loved one because bill payment has not been made by post-death payment deadlines. However, those administering their family member’s final affairs should avoid paying bills until they have sought legal counsel.
Even those in charge of the smallest of estates or those that will not require Court intervention because of the deceased family member’s use of a Trust or other nonprobate assets must be aware of the rights of creditors and the creditor claim rules. Failure to do so may open the individual serving as Personal Representative, Executor, or Trustee to legal liability to creditors and to beneficiaries of the estate.
Some general issues involving creditor rights to be aware follow.
- For many creditors, the creditor has a process it must follow to submit a claim. Many creditors must file a claim in the deceased’s estate if it wants to be paid. If the person administering the deceased’s final affairs pays a bill without requiring the creditor to follow this procedure, the individual my expose himself or herself to legal liability.
- Many creditors must submit their claim within a certain period of time or lose the right to be paid. If a creditor submits a claim after the expiration of the claim period, the creditor’s claim is barred for being untimely. If the person administering the deceased’s final affairs pays a bill after the creditor claim period ends, he or she may be liable to the beneficiaries for paying a bill he or she should not have paid.
- Payment of creditors follows an order of priority. Indiana law gives priority of payment to some creditors. For example, expenses of administration are paid before government creditors and government creditors are usually paid before non-government creditors. If the person in charge of the deceased family member’s final affairs pays a creditor out of order and there are insufficient funds to pay other creditors, he or she may be personally liable to the other creditors.
- Some assets are subject to creditor claims, while others are not. Some assets are typically not subject to creditor claims. For example, life insurance proceeds payable to individuals are generally exempt from being used to pay a creditor’s claim.
- The deceased family member’s legal documents must be followed. The deceased family member may also leave precise instructions in his or her legal documents (i.e. Will or Trust) regarding which assets to use to pay creditors or otherwise how creditors should be paid. Failure to follow these instructions can open that individual up to personal liability.
Payment of a deceased family member’s bills is just one of several issues that will need to be resolved to settle the family member’s final affairs. Our firm has extensive experience in assisting family and friends through the sometimes emotional and overwhelming experience of settling the estate of a deceased loved one. If the Stinson Law Firm can assist you, please do not hesitate to contact us at 317-622-8181 or www.stinsonelderlaw.com. We look forward to meeting with you to start this process.
Jeff is Certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation, a distinction held by only a handful of lawyers in Indiana. For almost 20 years, he has focused on elder law, estate planning, long-term care planning, Medicaid planning, Veterans Affairs benefits planning, special needs planning, guardianships, and estate administration.