You’re owed money by someone to whom you’ve loaned money or provided services and before you get paid, the guy dies. What are you gonna do?
I was in my doctor’s office this past week and he had a patient who recently passed away. This patient still owed the doctor a substantial amount for the medical services that were provided to the patient. My doctor asked me out how he could collect the amount owed from the patient’s estate or trust. And I thought, “Oh, what a great idea for a column.” So, here we go.
Firstly, if someone owes you money, dies, keep in touch with the deceased’s family or other loved ones. Make sure that they know that you are still owed some money. Don’t stop sending the monthly bills. Get a forwarding address if possible. There is a big difference in how known creditors are treated than how unknown creditors are treated. The rules for known creditors are much more favorable for the creditor than the rules for unknown creditors.
The money that is owed to you is considered a debt of the estate and/or the trust of the deceased. If the survivors do not pay the debt, then you have to start investigating. Is there an estate or trust from which to pay the debt?
To determine if there is an estate is going through the probate court process, you can check the probate court case records. In some counties, like St. Clair County, you can search court case records online on the county website. Otherwise, you have to contact the court directly.
Once you find that an estate proceeding has been started in the probate court, you can get the name and address of the appointed personal representative of the estate from the court file. You then prepare a claim for the debt, typically using probate court form PC579, and deliver that claim to the personal representative of the estate. A copy of the claim should also be delivered to the probate court. If you do not use the court form, your claim must include your name and address, the basis of your claim and the amount of your claim.
To be a valid claim, it has to be presented to the personal representative and the court within certain time periods. The personal representative is required to publish a notice to creditors in a newspaper of general circulation in the county of the deceased’s residence. Creditors generally have four months from the date of publication to file a claim.
If any debt is known to the personal representative at any time prior to the expiration of the four month claims period, the personal representative is required to deliver a copy of the notice such known creditors. You then have to file your claim within four months from the date the notice to creditors was published, or within one month of sending of the notice to you, whichever is later.
When you are a creditor known to the personal representative prior to the expiration of the four month claims period and the personal representative never sends a copy of the notice to creditors to you, then you have three years from the date of death to file your claim.
If the personal representative believes your claim is not valid, they have 63 days from the day of presentment of the claim to notify you of the denial of your claim. If the claim is not denied within that time, it is deemed allowed. If your claim is denied you 63 from the date of denial to commence a proceeding in court against the personal representative asking the court to make a determination regarding your claim.
If there is no probate estate but the deceased had a trust that was revocable prior to death of the deceased, then the trustees of the trust have the same duties as a personal representative would have regarding publishing the notice to creditors and delivering a copy of the notice to all known creditors. You then have similar time frames within which to present and/or prosecute your claim.
When there is a trust, but no probate estate, it may be a challenge to locate the information to file a claim if you are not given a notice to creditors. If you are an unknown creditor, you only have four months from the date of publication of the notice to creditors, even if you never saw the publication of the notice in the local paper.
If you keep on top of these claims and you regularly bill your debtor, customer, client or patient, you should be able to preserve your claim and then be able to collect what you are owed from the heirs, the estate or the trust.
If however, the deceased did not have a trust or a probate estate, but only had beneficiary designations or joint ownership assets, you may be out of luck. These types of assets are generally not subject to claims against the trust or estate.
By Matthew M. Wallace, CPA, JD
Published edited April 16, 2017 in The Times Herald newspaper Port Huron, Michigan as: How to collect money from a person who has passed away