Dealing with Creditor’s Claims Presented
- Determining Whether Creditor’s Claims Are Lawfully Presented
- Special Circumstance: You Are a Creditor — Making a Claim Against the Estate Yourself
- Disposing of Lawfully Presented Creditor’s Claims
- Disposing of Defective Creditor’s Claims
- Source of Funds for Payment of Creditor’s Claims
- Petitioning for Contribution from the Beneficiaries
The Issue: Has each creditor given notice of his/her/its claim according to law?
Why Insist on a Lawfully Presented Creditor’s Claim for Payment (other than “because it’s the law”)? Washington law does requirethat a creditor timely file and serve a Creditor’s Claim before the corresponding debt may be paid. Paying a debt before the timely filing and serving of its Creditor’s Claim, however, opens a Notice Agent to the possibility of personal liability to the nonprobate estate for the amount of the payment, for example, if:
- The Creditor’s Claim is:
- Never filed or served, or
- Not filed & served within the statute of limitations period; or
- The estate is or becomes insolvent.
Bottom-line: Protect yourself, the nonprobate estate and its beneficiaries and creditors by following the statutory Creditor’s Claimprocedure for the payment of Decedent’s debts: Insist upon the proper and timely presentation of a Creditor’s Claim before payment.
RCW 11.42.070 provides the requirements for the lawful presentation of a Creditor’s Claim:
- The Claim must be signed by the creditor or the creditor’s attorney or agent, and
- The Claim must contain the following information:
- The creditor’s name and address.
- If made by the creditor’s agent, the agent’s name and address and the nature of the agent’s authority as regards the creditor.
- A statement of facts or circumstances surrounding theClaim.
- The amount of the Claim.
- If the Claim is secured, the nature of the security; if not yet due, the date when it will become due; and if contingent, the nature of the uncertainty.
- The Claim must be presented within the Statute of Limitations.
- The original of the claimant’s Creditor’s Claim form must be filed with the Court.
- A copy of the claimant’s Creditor’s Claim form must be served or mailed (by first-class mail) to you.
The Issue: As Decedent’s Notice Agent, you are entitled to make a claim against the nonprobate estate yourself despite your resulting conflict of interest of having the authority to approve your own claim. The Legislature has resolved this conflict by making your claim inferior to all others, ie, you get “paid last.”
RCW 11.42.090(3) provides for strict provisions if you are a creditor of Decedent and wish to present a Creditor’s Claim against the estate yourself: You cannot pay your Claim unless all other Creditor’s Claimsfiled and all debts having priority to your Claim have been paid in full or satisfactorily compromised, regardless of whether they are allowed or rejected.
This “last in line” order of payment applies not only to any Creditor’s Claim you make but also to any made by any other Beneficiary of Decedent’s nonprobate estate.
The Issue: How do you lawfully respond to any creditor who has lawfully given notice of his/her/its Claim?
Lawfully presented Creditor’s Claims may be:
- Paid (in whole or in part),
- Compromised (ie, by negotiating a settlement with the claimant),
- Allowed (in whole or in part) by notifying the claimant by personal service or first-class mail to the address stated on the Claim that you agree that it is valid and lawfully presented,
- “Held,” by taking no action about it, or
- Rejected (in whole or in part) by notifying the claimant of the rejection.
Timing (for all actions other than “holding”): Within the later to occur of:
- 4 months from the date of first publication of your Nonprobate Notice to Creditors, or
- 30 days from the date of your receipt of the Creditor’s Claim.
The Issue: Can you lawfully pay a creditor who has not lawfully given notice of his/her/its Claim?
RCW 11.42.070(4) provides that if a Creditor’s Claim is not lawfully presented (for example, it contains defects such as an omission of one of the statutory requirements, or it is not submitted in writing), then so long as:
- The Creditor’s Claim was made within the applicable statute of limitations,
- It was made in writing, and
- It is due.
You may pay it if:
- The estate is solvent,
- The amount you propose to pay is the amount of indebtedness over and above all payments and offsets, and
- Your payment is made in good faith (eg, you believe the Claim to be valid — the other criterion for allowing a Claim).
Bottom-line: If you receive a very modest bill, have no qualms about paying it, and believe that it would not be cost effective to return it and insist on the submission of a proper Creditor’s Claim, then you may waive the defects and pay it without subjecting yourself to personal liability.
Caution: You may not lawfully pay any Creditor’s Claim that was presented after the expiration of the applicable statute of limitations. RCW 11.42.090(1) By paying a Claim unlawfully, you are subjecting yourself to personal liability to the nonprobate estate and its Beneficiaries for the amount of your payment.
The only funds that the Notice Agent may use for the payment of a Creditor’s Claim are those received as a result of Decedent’s death by the Notice Agent or by those appointing the Notice Agent except:
- By a written Agreement under RCW 11.96A.220, or
- By a Court Order issued in a judicial proceeding under RCW 11.96A.080. RCW 11.42.085
A Notice Agent may seek contribution from the Beneficiaries of Decedent’s nonprobate assets for their respective pro rata share of the nonprobate estate’s claims and expenses. See: Petition to Require Contribution.
You have now completed the steps for dealing with Creditor’s Claims in a typical nonprobate estate.
Your author thanks Kris Henderson, a Reference Librarian at the King County Law Library, for suggesting the need for this page.