You might be in the process of looking for someone to serve as a personal representative, or you may be planning to become a personal representative yourself in the future. A personal representative has to take on a number of responsibilities, including handling creditor claims on the estate. So you may wonder you should go ahead and use estate assets to pay off creditors.
While ignoring creditor claims is not a wise course of action, a personal representative should not immediately move to pay off creditors. According to U.S. News and World Report, there are certain issues a personal representative must deal with before settling creditor claims.
Communicating with heirs
The first duty of a personal representative is to the heirs of the estate. People who stand to benefit from an estate want to know their inheritance is in good hands. So a personal representative should promptly inform them about the current situation, including about debt owed by the estate. This can assuage concerns and minimize the risk that heirs may litigate the personal representative for mishandling duties.
Authenticating creditor claims
Even if a personal representative receives a notice of a creditor claim, they do not have to pay the claim right away. The personal representative should make sure the claim of the creditor is valid. While certain factors may necessitate a timely payment, a personal representative can require creditors to prove their claims are authentic. Personal representatives may also negotiate with creditors to seek smaller debts if possible.
Refraining from hasty payments
While personal representatives owe beneficiaries a duty to keep their inheritance safe, paying the heirs before reaching a final agreement with creditors may cause legal problems. If heirs receive their inheritance first, it could possibly leave the estate with insufficient assets to pay off creditors. Creditors may come after the personal representative personally to pay off the outstanding debt.
These are important considerations for any personal representative to handle. Such issues are why personal representatives consult with legal counsel for guidance. With proper understanding and help, personal representatives may stand a better chance of successfully closing out an estate.