Once the Executor or Administrator has received their Letters, obtained an EIN, and opened a bank account for the estate, it’s time to marshal the assets. Marshalling the assets simply means finding everything the decedent owned and consolidating it into the estate’s account(s). All life insurance proceeds payable to the estate, investment accounts (if they cannot be transferred without cashing them out), bank accounts, bonds, CDs, retirement account proceeds that cannot be transferred directly to beneficiaries, home sale proceeds, car sale proceeds, or any other liquid asset should be added to the estate account(s) to consolidate the assets. Some of these assets may have a beneficiary designation and would not be included in the probate process (see our blog Probate versus Non-Probate Assets) and assets that are specific gifts should be gifted rather than converted to cash if sufficient assets exist to pay creditors.
Before this point in the probate process, the Executor or Administrator has typically been collecting any bills that come in and notifying utility companies, mortgage companies, insurance, credit card companies, and other creditors that the account owner has passed but has not been able to do anything with the bills. Now that an estate account is opened and the court has officially appointed an Executor or Administrator to act on behalf of the estate, it’s time to start paying those bills. Not all bills and creditors are treated equally because creditor claims have priorities. Paying creditors in the correct order is important, as some estates will not have enough funds to pay all remaining creditors.
To find all creditors of the estate, a Notice to Debtors and Creditors will run in the local county organ or legal organ in the county where the probate is open. This notice is a public publication that states that any company or individual who has a claim against the decedent, and now the estate, should come forward and let the court know they are owed money. This publication runs for four (4) consecutive weeks. Once the publication has finished running, creditors have an additional three months to make any claims known before the Executor or Administrator can begin making distributions safely. If the estate has enough funds, the Executor or Administrator should pay all known creditors (including taxes) and can then begin making distributions to heirs and beneficiaries.
The next article will discuss making distributions and getting ready to close the estate. Dealing with creditors can be a complicated and frustrating experience. Knowing the right thing to say, who to pay first, and how to negotiate with creditors is easier with someone behind you that has experience dealing with creditor situations. At Grissom Law, we work with you through the full probate process to make things as stress free as possible.
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