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Thursday, September 16, 2010

What does an executor do about creditors and claimants?

Executors on many estates publish a notice called Notice to Creditors and Claimants in the newspaper in the area where the deceased lived. The purpose is to find out if there are any debts "out there" that the executor doesn't know about. As debts of an estate must be paid before beneficiaries may be paid, paying out the estate before knowing about all debts could end up in a mess.

The Notice to Creditors and Claimants directs anyone who believes that the deceased owed him or her money to contact the executor within a time specified in the notice. I've noticed that most articles and information on this topic stop there. They don't tell an executor what to do if someone makes a claim. This article is intended to take the information a little further.

If the executor believes that the claim is a legitimate claim, the executor may accept it and pay it from estate funds. This might mean waiting until there are funds available in the estate, but most creditors would rather wait to get the money than not get it at all. If the Inventory of the estate has not yet been filed with the court, the executor should add the valid claim to the inventory as a debt, and then pay it along with all other estate debts.

The executor may not be sure that a claim is valid, particularly if he or she has not had a lot of involvement with the deceased's financial affairs prior to the deceased's death. The executor may then require the claimant to verify the claim by producing a receipt, work order, written agreement, I.O.U or whatever paperwork is available. If the executor  still thinks that the claim is invalid or that the amount of the claim is wrong, he or she can serve a notice on the claimant that requires the claimant to come up with some conclusive proof. If that proof is not given within a certain time (in Alberta it's 60 days), the claim is lost. This means the claim can never be made again, as it is legally barred.

In practice, most claimants will send the supporting paperwork along with the claim in the first place, as it is just common sense to do so. It's rare that an executor ends up serving a notice to contest the claim.

32 comments:

  1. I am in Alberta ... How many weeks is it considered adequate to post the Notice in the local paper, and how much of a time frame do you allow for the creditors, if any, to respond?

    Thanks,
    Casper

    ReplyDelete
  2. Hi Casper,

    You would advertised twice, one week apart. Allow them 30 clear days from your last advertisement.

    Lynne

    ReplyDelete
  3. if owed personal taxes, how does this affect monies of the estate if i'm not only executor, but beneficiary? does it tie up the estate because of my own tax situation, or would it just relate to inheritance monies i would get?

    ReplyDelete
    Replies
    1. Don't tie up an estate because of one beneficiary's personal situation. Distribute the estate in a timely manner wearing your executor's hat. Then once you receive the money, put on your beneficiary's hat and deal with your personal tax situation.

      Lynne

      Delete
  4. HI Lynne:
    I live in Ontario. My Father died 10 yrs ago. Mom just died in spring 2013. How many times am I required to run the "notice to creditors", and in how many different newspapers please?
    Kim

    ReplyDelete
    Replies
    1. Hi Kim,
      You are not required to run the notice at all, but assuming you've decided that it's a good idea, you only have to use one newspaper. I'm attaching a link below to a brief discussion of the rules specific to Ontario.

      http://www.torontoestatemonitor.com/estate-administration/some-tips-on-paying-estate-debts/

      Lynne

      Delete
  5. Hi Lynne
    I live in BC and my son passed and lived in sask. He committed suicide and named me as beneficiary (mother) in his suicide note-no will. I was advised by wills and estates in Regina to run a notice to creditors before I made the application for administrator. The Leader Post in Regina says I do not have the authority. Please advise.

    ReplyDelete
    Replies
    1. I'm so sorry to hear about your son. Running a notice to creditors is probably a good idea, since you are not especially familiar with all of his financial affairs. You are being told you don't have authority because you are neither (a) appointed as executor under a will, nor (b) appointed as administrator by the courts.

      Lynne

      Delete
  6. I live in Alberta. My mom passed away leaving an estate above 100k, and I'm certain there are no creditors and claimants. Am I still required to run a notice to creditors and claimants, or is it optional?

    ReplyDelete
    Replies
    1. Advertising for creditors is always optional, regardless of the amount of the estate. Advertising is a way for executors to minimize personal liability for possibly paying out the estate without paying a creditor first. You have to decide for yourself whether there is any risk.

      Lynne

      Delete
  7. It's optional. Each executor weighs the risk of there being a creditor out there against the protection (and cost) of publishing the notice.

    Lynne

    ReplyDelete
  8. My Father recently passed away leaving me as Executor. I am finding it a very difficult task as the home he resided in, was also owned by another individual. This person is not being co-operative and not permitting me access to my Father's person property. How do I gain access to his things to disperse of them and find out how the property is titled? Also his bank account was drained and there are no monies to bank debits:( What does one do in this case? Thank you for your assistance.

    ReplyDelete
  9. Hello Lynne,
    My mother passed away last week and my sister and I are the executrixes. Unfortunately, our family lawyer is away for the next 2 weeks so I thought to consult you. We are going to put in a Legal Notice to Creditors in the local paper here in Red Deer, Alberta (where mom passed away). How many times do we run it, period in between and what is the cutoff period for creditors to respond in ALBERTA? Thank you so much for any advice.

    ReplyDelete
    Replies
    1. Hi Cheryl,
      You need the NC34 form. If the gross value of the estate is less than $100,000, you only have to run it once. If the value is >100,000, run it twice, with a week in between. Creditors have 30 days from the last date of publication. By the way, my book called "Alberta Probate Kit" contains a whole chapter on how, when, and why to advertise for creditors.

      Lynne

      Delete
  10. Hi Lynne My Aunt passed away and the estate is over 100k. I am the trustee of the will and myself and one other person are the benefactor. I looked after her for the last 2 years and know all of her finances. No debt , no investments. no house etc. Just cash in a joint bank account. Myself and my Aunt on the joint account.Do I have to probate the will and notify creditors. I and my Aunt live in Manitoba

    ReplyDelete
    Replies
    1. Notifying creditors is not required by law. It's always up to the executor to weigh the risk of there being an unknown creditor out there. Given what you've said about managing your aunt's affairs for the last couple of years, you are in a pretty good position to determine whether there are any debts lurking out there. Make sure you consider things like caregivers, housekeepers, medical suppliers, etc. Most likely there isn't anything you're not aware of.

      You haven't said anything about your intentions with respect to the joint account, but I assume that you are planning to divide the account equally with the other beneficiary. If you do this voluntarily, you may not have to go to the expense of getting probate. In my experience, most banks are still paying out joint inter-generational bank accounts to the survivor, even though they are not supposed to. Keep in mind that the law says that joint account belongs to the estate. This means that if the other beneficiary demands it, perhaps because he or she is not comfortable with the information coming from you, you may have to go through probate. I believe that with good communication, you and the other beneficiary should be able to deal with this situation without probate.

      Lynne

      Delete
  11. Hi Lyne,

    I am an executer for an estate which has some fairly minor debts. Trouble is, there is basically no money in the estate (maybe a few hundred, certainly less than a thousand) and the debts that are outstanding, while not great, will be more.

    How does one go about handling such a situation (who gets what, if anything) and notifying creditors that they cannot be paid?

    Thanks in advance, this has been a very helpful resource!

    ReplyDelete
  12. Anonymous, my father recently passed away. No assets of any sort, savings or estate. He was 80+ years of age, lived with us and only received his pension for income. No life insurances of any sort. One credit card debt and car loan neither of which will be satisfied by his final pension payment, the government funeral benefit and a couple of small cheques that I have given to the bank. The bank has frozen his chequing account, and is keeping his remaining pension funds to put towards his credit card balance. The care has been turned back in to the dealership bank. Once the funeral benefit has arrived and given to the bank...estate of... is there anything further I have to do with the bank?

    ReplyDelete
  13. Hi Lynne,

    My common law partner passed away in April. I have notified each creditor and claimant as they would call for him and I had informed them of the situation (was waiting for administrator of estate certification in MB). Am I still required to run an ad in both a local newspaper as well as the Manitoba Gazette? Also, is this something I should have done a while back as I am still waiting for monies to come through from his side in order to so? Thank you so much in advance :)

    ReplyDelete
    Replies
    1. You're not required by law to advertise for creditors. Executors choose to advertise if they feel there is a risk there might be a creditor they don't know about. This is because of the executor's basic duty to ensure that all debts are paid before the beneficiaries inherit anything. If a creditor turned up later and you had not advertised, you might well have to pay the creditor out of your own pocket. If you feel that you have contained any risk of this happening, you don't have to advertise. As for timing, if you want to advertise, you can do so at any time before disbursing the estate funds.

      Lynne

      Delete
  14. As executor of estate for my sister from Calgary( passed away Sept 2014)could you please provide some clarification on creditor obligations? The creditors advertisement ran in the Calgary Herald Oct. 9,16 of 2014 with the deadline of notification as November 23, 2014. Nineteen months after the advertised deadline, an email was received from a person never heard of before requesting $10 000 for an undocumented loan. What are the obligations of the estate?

    ReplyDelete
    Replies
    1. If it's undocumented, the person who is claiming the loan cannot prove that it exists. The executor's obligation is to pay all legally enforceable debts, and it doesn't sound to me as if this one is enforceable.

      Lynne

      Delete
    2. Thanks, so if the loan request was submitted now and there was documentation would that change the response? Would it matter that the timeline as stated in the ad , has passed -by over a year?

      Delete
  15. I am a creditor of my deceased divorced husband and I will be waiting 4 years in April of 2017. What can I do besides hire a lawyer to get money owing to me. The executor keeps making up excuses to delay me getting my money and the estate just keeps getting smaller

    ReplyDelete
    Replies
    1. Hopefully the estate is getting smaller only because debts are being paid. If the executor is paying the beneficiaries rather than creditors, he is risking personal liability for those debts.

      No, I don't know of any process for getting an executor to pay out debts other than a written demand, which, if ignored, is followed up by legal action.

      Lynne

      Delete
  16. Hi Lynne,
    I am considering making a claim against an estate in Ontario, should this be done before or after the Will is probated?
    Thank you for all of your articles and comments, they are very helpful!

    ReplyDelete
  17. Hi Lynne,
    I recently became aware of the death of an individual I had a judgement against in Small Claims Court, back in 2007. The only way I found out about his death was by doing a general search on him, which led me to the CP Rail Pensioner's Page, where it was mentioned that he had died last July. I had been diligently checking the online Obituaries of the biggest newspaper in Winnipeg, and there never was an obituary. Likewise, there was no mention of the situation in the Manitoba Gazette (cursiously, the individual's brother had also died in 2016, and his estate *was mentioned* in the Manitoba Gazette). I then checked the Queen's Bench website and found that there had been an application, a rejection, and then an order for probate finally granted in September of 2016. Given that I had a judgement registered against the deceased, should the probating lawyer have tried to contact me? There was no Letter of Satisfaction of the Debt ever filed by myself, the matter was still open. What should I do to recover this amount? Seems to me that the probate lawyer should have done a little better on his due diligence. I have sent him a letter with the details of the matter; ho long should I wait to hear back from him?

    ReplyDelete
  18. Hi Lynne,

    I have a quick question. If you are named in the Will as the executor, but you also have a claim against the estate, is it still possible to be court appointed as the executor? Or, would the conflict of interest prevent that person from being a court appointed executor?

    Thank you

    ReplyDelete
    Replies
    1. It's legally possible but in my opinion is not a good idea. It's impossible to reasonably handle both sides of a dispute so you would more than likely end up in court with a beneficiary who is asking to remove you or asking for court direction to address the conflict.

      Lynne

      Delete
    2. You know, it occurred to me as I hit "post" on your question that I automatically assumed that by a claim against the estate, you meant contesting the will. However, if you are simply talking about a claim such as the deceased owed you some money for something and you have all the paperwork to support it, you should still be able to carry on as the executor without any real issues. Sorry, this is what happens when I blog at 2 a.m!

      Lynne

      Delete
  19. My brother-in law passed away. No executor, no will, single, on disability and some CPP ... total assets $180.00 in his pocket. Funeral cost (cremation) 5548.75 minus amounts granted by CPP + donations and money in pocket = 3430.00. Left owing = 2118.75 + intrest 124.93 = 2243.68 Total owing. He passed away with nothing and only family members are on fixed incomes. What do we do with invoice ... ??? Nobody can pay.

    ReplyDelete
    Replies
    1. Have you contacted the Office of the Public Trustee? They might be able to help with the cost of the funeral. I realize that nobody has applied to be the administrator of the estate, but I don't think that will in any way stop the Public Trustee from answering your questions and possibly assisting your family. You can find them online. Contact the office that is nearest where your B.I.L. lived.

      Best of luck,
      Lynne

      Delete

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