Straightforward Process for Settling Debts

• Probate increases the chances of creditors bringing claims against the estate but reduces the amount of time they have to do so.   

• If there is no probate or trust administration of your estate, bills may be ignored or paid in an unfair way.   

• Some people leave one account to a trusted beneficiary who will likely pay bills out of that account. 

 

Opening a probate administration sets a fairly stringent one-year statute of limitations on creditor claims.  It burdens creditors to come forward and file a claim within one year of the probate opening, or most types of claims go away.  Further, the executor in the probate is holding all of the money so as bills come in, there is a specific person, the executor, and a priority order to pay them in (attorney, taxes, funeral expenses, unpaid wages, etc). There is a very small risk of being sued by a creditor based on a distribution after the one-year period.   

 

If you use End Probate, and no probate is opened, then in most circumstances creditors have four years to bring a claim. If a creditor brings a successful claim, the beneficiaries will be legally responsible for paying off the debt, but each one is only responsible for up to the amount that person inherited. 

 

In practice, outside of secured interests (such as a mortgage), it is very uncommon for creditors to bring a claim unless they are family members who have personal knowledge of the deceased person's finances and know about the individual identity of the beneficiaries. It is quite expensive and risky for a creditor to try to open a probate to collect from an estate, so in practice, few creditors do.

 

Using the End Probate process, no one person is in charge of the money. So regular expenses of the estate (like burial costs, maintaining the home until the sale, and other expenses) need to be either paid by the beneficiaries in equal shares, or one person ends up paying them.   There is not a cost-effective way for the person who pays to get reimbursed and it can feel unfair.  Sometimes the bills are not paid, and that means the beneficiaries might get sued.  It’s not a perfect solution, but it also sometimes means that costs are kept to a minimum and if all the beneficairies do not agree with an expense, the expense is not incurred (i.e. remodeling the bathroom before selling the house).   Some people decide to leave a bank account to one beneficiary who they believe will pay the bills out of that account and are okay with that person ending up with more legal rights to that money than the others. Also, Med-Cal liens are not enforced against non-probate distributions, so there is no current risk of having to pay back a skilled nursing facility for costs of long-term care at the end of life (sometimes this rule changes, but this is the current rule).