What to Do When a Person Who Owes You Money Passes Away in California
When you have lent money to or are otherwise owed money for goods or services by a person who has passed away, this does not mean that the debt necessarily goes away at the time of the person’s death. Whether the money is owed to your business or to you personally, you may be able to recover the money through the California state probate court in which the estate of the deceased person (called the “decedent”) is being processed.
How the California Probate Process Serves Creditors
Although a chief purpose of the probate process in California is to see to that the decedent’s assets are distributed to his or her beneficiaries as listed in the will and other testamentary instruments (or based on California intestacy law if there was no will), another purpose of probate is to see to it that valid creditors such as yourself are paid for their outstanding debts.
In fact, when the probate process works correctly, the creditors should be paid what they are owed prior to the beneficiaries receiving property. Furthermore, creditors will take precedence over beneficiaries in receiving property from the estate, which can mean that the beneficiaries will take less than what was listed in the will, or may receive nothing at all when the creditors’ claims exceed the amount left in the estate.
You Must Act Fast to Recover Your Debt in California Probate Court
That said, because the probate court will ultimately act to award property from the estate to the estate’s beneficiaries, you will need to act quickly in filing your creditor claim with the probate court, as in most cases you will not be able to recover property from beneficiaries themselves after the property has been awarded.
In California, a creditor must file a claim with the probate court either: 1) four months after the personal representative of the estate (sometimes called the “executor”) has been appointed by the court, OR; 2) within 60 days of receiving a Notice of Administration from the personal representative (whichever is later).
A personal representative is required to contact creditors of the estate with notice of the probate court proceedings, but note that a personal representative may not always be aware of all the debts of the decedent in order to give notice. For example, if the decedent did not keep your invoice, promissory note, or similar paperwork of your debt in a place apparent to the personal representative, he may simply not know about it to send notice of the probate proceedings.
Thus, you should not wait for an official Notice of Administration if you have an outstanding debt, and should reach out to a probate litigation attorney as soon as possible after a decedent’s death to ensure that your creditor claim is properly filed with the court.
When you speak with a probate litigation attorney, he or she can inform whether your debt is actually recoverable (e.g. it is not barred by the statute of limitations), what evidence you may need to support the veracity of your claim, and the next steps necessary to proceed with recovering the funds from the estate that are properly yours.
Work with a Pasadena Probate Attorney to Recover Your Debt
Christopher B. Johnson is an estate planning attorney in Pasadena, CA who has helped thousands of individuals and families over the past 18 years in creating and reaching their estate planning objectives as well as in navigating the probate process in California to achieve positive outcomes. Schedule a consultation with him today to discuss your estate planning and/or probate goals.