The personal representative appointed to administer a decedent’s estate has a lot of important duties to perform. One of these is making a diligent search for all creditors of a decedent’s estate. This due diligence extends to creditor claims that are not yet matured, or which may be contingent or not liquidated.
The failure of a personal representative to adequately perform his or her due diligence with regard to known creditors and reasonably ascertainable creditors, has severe consequences. He or she can be held personally liable if the estate’s assets are insufficient to pay the claim of any reasonably ascertainable creditor.
But how does the personal representative know who is a reasonably ascertainable creditor and what must he (or she) do to find them?
The Importance of Notice
It is worth explaining that a claim against an estate—here, a creditor’s claim—is property protected by the due process clause of the Fourteenth Amendment. That, of course, means that it may not be taken away from you (or, in this case, the creditor) without due process.
In the context of a probate proceeding, that “due process” is notice.
A personal representative is required to give notice to all creditors of the estate of the proceedings. The probate cannot be finalized until all the debts and claims that must be paid by the estate have been determined and paid, and it is the personal representative’s duty to do this.
But what notice a creditor is entitled to depends on whether the creditor is known or reasonably ascertainable.
Receiving notice is critical for creditors because they must meet strict deadlines for filing claims, and receiving an extension of the deadline is difficult to do.
Reasonably Ascertainable Creditors
A personal representative’s duty to notify all reasonably ascertainable creditors of the probate of a decedent’s estate does not mean that the personal representative must guess at who is a creditor.
A “reasonably ascertainable creditor” is a creditor that the personal representative would discover by exercising reasonable diligence in searching for creditors. What constitutes a “reasonable” search by the personal representative, or what fails to be sufficient exercise of diligence is a question of evidence that will vary in every case. And it is one that will be decided by the court.
A reasonably ascertainable creditor need only be a “potential” creditor of the estate. It is the personal representative’s duty to try to discover all potential creditors and to provide them with notice—not to decide the validity of the creditor’s claim.
That is left to the court to do.
The duties of a personal representative to administer an estate are many and significant. Which is why it is important to always consult experienced estate and probate counsel.
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