It is almost impossible for a person to die without having some debt, and part of an executor’s job is to pay the debts of the deceased before distributing the estate to their heirs and beneficiaries. When creating an estate plan, it is important to understand how creditor claims may impact your overall estate. Ohio has specific laws that dictate whether and to what extent a creditor can make a claim on an estate after the passing of a debtor. To learn more, call or contact Kryszak & Associates today to schedule a consultation of your case.
How a Creditor Claim is Made
Under Ohio law, a creditor has six months from the date of the debtor’s passing to present a claim to the estate. However, an administrator or executor to the estate can shrink that time period to just 60 days so long as a letter is sent to each creditor informing them that they only have 60 days to submit a claim. If a claim is made outside of the statute of limitations, it can be thrown out by the court.
Once an executor or administrator has been appointed to the estate, a creditor can make a claim in three different ways:
- Send the claim to the estate executor in writing
- Send the claim to the estate executor in writing and file a copy of the claim with the probate court
- Send the claim to the deceased debtor in an ordinary mailing that is received by the executor of the estate (such as a small, monthly bill)
After a claim is made to the estate, the executor can either allow or reject it, and if the creditor’s claim is rejected, they have two months from the date of rejection to bring an action to enforce the claim to the debt. An estate cannot be closed until all creditor’s claims have either been accepted or settled through an action after being rejected by the executor.
In some cases, the deceased’s debts are greater than the value of their estate. When this happens, creditor claims are prioritized and paid according to their priority. This means that some creditor claims in the lowest priority classes may not get paid or paid only a fraction of their original value. To learn more about estate insolvency, talk to an Ohio estate administration attorney today.
Exempt Creditor Claims
It is important to note that some creditor claims are exempt from the six month statute of limitations. Some of the most common exempt claims include estate administration expenses, allowances for the support of any surviving spouse or minor children, federal and state taxes, secured debts, Medicaid debts, and contingent claims that depend on something that occurs after the passing of the debtor. One common example of a contingent claim is the default on a loan.