Our firm helps many people administer their deceased loved ones’ estates, which is the process through which assets owned by someone who dies are used to pay the deceased person’s bills and distribute the rest to heirs. Assets governed by contracts (such as life insurance and some bank accounts) are governed by the applicable contract’s rules, with other assets governed by probate law.
The value of contracts such as life insurance, bank accounts and real estate transfers triggered by death is the speed and affordability when someone dies.
In contrast, the probate process is not necessarily the fastest process of asset distribution, largely because probate’s overriding focus is to ensure fairness and communication. Because of the intense grief surrounding the passing of a loved one, family members can become very impatient in the context of probate administration. However, no matter the impatience, estate administration through probate often takes a minimum of six months.
There is one major law that creates the effective six-month minimum for probate administration. That law provides that any non-government creditor of a deceased person must serve the executor (or “administrator,” if there is no will) of an estate with a “claim” within six months of the debtor’s death. And, obviously, bills of a deceased person are paid before the deceased person’s assets are given/paid to heirs.
In other words, a man may die with a credit card in his name without any cosigners. If the man has a balance on that credit card when the man dies, the credit card company must present a “claim” to the executor of the man’s estate within six months of the man’s death in order to be paid.
Therefore, if an executor distributes some inheritance to heirs within six months of a person’s passing, there is a risk that a claim may be presented to the executor after that distribution but within the six months. In those situations, if the claim is a proper debt of the deceased person, the heirs can be personally responsible to pay back what was already distributed to them by the executor.
For this reason, it is usually advisable to not distribute assets or money to heirs until at least six months after the death of the person from whom the assets are coming. Nonetheless, if an executor and heirs are confident that there are no unknown debts of the deceased person, the estate can be concluded within the six months immediately following the person’s death. With that being said, unless there is complete knowledge that there is no risk of new creditor claims, I usually advise waiting the six months.
Creditors can be in a precarious position if an estate is not opened within six months of a debtor’s death. In that instance, it is physically impossible to submit a claim to the executor, because there is no executor until the estate is opened and the executor is appointed by the probate judge. However, a creditor may attempt to open a debtor’s estate, but that process can be cumbersome and ultimately ineffective.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.