When a homeowner dies and there is probate property remaining the probate process can take time. But just how are creditors handled during this process? In this article we have taken time to outline the considerations at every stage, and in what order creditors will be prioritised in the probate process.
How are estate creditors handled in Probate?
Losing a loved one is always tough. Not only does it affect a family emotionally, but settling a person’s estate can be a major headache. If an estate is worth over $75,000 in the state of Florida, it will go through probate court. If you are the executor of an estate. one thing you will have to deal with is paying any creditors the decedent might have had. Creditors will expect to be paid even if the person they lent the money to is dead.
There are a few things you should know about the probate process that will make everything go smoothly when you are settling the estate of a loved one.
How the Probate process works
When a person dies in Florida, you must notify the circuit court within 10 days after finding out about the death. If their estate was very small and did not include any real estate, you will not have to go through the probate court. If they have been dead for over two years, or the assets are worth less than $75,000, the will simply goes through a summary administration.
In all other cases where there is probate property, the estate must go through the formal probate process. A will must name someone as an executor. The executor attends court asking to be named as the personal representative of the estate.
The representative will be given a Letter of Administration authorizing them to settle the estate. The personal representative inventories the estate, pay any taxes that are owed as well as the bills of any creditors. The court supervises the representative.
On payment of all the bills, money is distributed to the estate’s heirs. Once everything has been distributed, the case is closed. Then all the representative are released from any further responsibilities.
Creditors rights to probate property
Probate cases can take years to complete. Creditors will have two years to file a claim to recover money from an estate and any probate property remaining. There are certain creditors that will have priority over others. In The Sunshine State, 8 classes of debt are processed in this order:
1: Attorney fees and expenses of the representative.
2: The state allows for $6,000 of funeral expenses to be paid before anything else.
3: Tax debts and recovery of Medicaid expenses.
4: Hospital and medical expenses that are under 60 days old.
5: Family support of up to $18,000 during the probate period.
6: Any money owed for child support.
7: If the deceased had a business that continued to run after they died, the debts of the business would be paid at this stage.
8: All other debts, including judgments and credit card debt. Finally, payment is made for additional funeral expenses and medical bills.
Creditors will only be able to go after the money that is in the actual estate. This a challenge with probate property. If the decedent left you a Paid on Death bank account, a life insurance policy, or living trust, no creditor will be able to touch it.
A final word on probate property
According to the website dhgpl-law.com, it is always a good idea to be represented by a professional estate attorney whenever you go through probate. Settling an estate can be a full-time job, and you probably already have one of those. A lawyer will be very familiar with the paperwork and the process of probate. They will be able to help you settle your loved one’s affairs so you can focus on remembering the person that you lost.
HANDY REFERENCES ABOUT REAL ESTATE AND SELLING PROPERTY