One aspect of the California probate process is dealing with estate creditors and probate claims. First and foremost, California has specific laws on probate procedures including how estate creditors and probate claims are to be paid. The estate’s representative (executor or administrator) must notify all interested parties that the decedent has passed away so monetary claims can be made against the estate. The representative is required to provide written notice to known creditors and publish notices in newspapers for unknown creditors. There are many duties of the estate representative. One of them is to make sure the proper creditors are paid.
Notice to Estate Creditors
The representative must complete both sides of the Notice of Administration to Creditors Form DE-157. All known creditors should be listed on the form. The form must be mailed to the creditors along with a blank copy of the Creditor’s Claim form DE 172. The proof of service must be filed with the court. Creditors should be contacted within four months of the court issuing Letters or within thirty days after receiving knowledge of an estate creditor. In addition to notifying commercial creditors, the estate’s representative must also notify state agencies, such as the California Department of Health Services, if the decedent received public assistance.
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When Probate Claims are Filed by Creditors
Upon the creditor filing a claim against the estate, the estate’s representative must review the claim and approve or deny it. The representative may approve a claim in part and use the estate’s assets to pay the creditor or dispute the entire claim. If a claim is rejected, the representative must provide the creditor with notice. The representative must complete Form DE 174, Allowance or Rejection of Creditor’s Claim and attach a copy of the creditor’s claim filed. The forms must be served on the creditor and a proof of service (neutral third-party over 18 years of age must serve the form) filed with the court. The creditor must file a claim against the estate within 90 days of the rejection. A hearing may be held in which the judge will decide whether the creditor’s claims are valid.
If there are not enough assets to pay creditors, the estate is said to be insolvent. When this occurs, federal and estate taxes are to be paid first. Next, probate expenses and funeral costs are paid. General creditors are usually paid last. Any remaining assets will be prorated to creditors. Beneficiaries will receive no gifts from an insolvent estate.
Sandra M. McCarthy, founder of A People’s Choice, has worked exclusively in the legal field since 1976. She served as the 2004-2005 President of CALDA (California Association of Legal Document Assistants). She obtained a Paralegal Certificate from the University of California, Santa Barbara. During her career in the legal field, she has worked as a freelance paralegal, law office manager and paralegal studies teacher, and has co-authored numerous legal publications and written hundreds of self-help legal articles. Sandy is dedicated to the expansion of affordable, low-cost, self-help document preparation.