Paying the Debts of the Estate
The Probate Court will appoint a Fiduciary (Executor of Administrator) to handle and distribute the property of the estate. Another job of the Fiduciary is to pay the debts of the estate. The creditors of the estate cannot go after the family members or beneficiaries of the deceased for monies owed. The creditors can only go after estate property for payment of their debt.
How Long Do Creditors Have to Make a Claim for their Debt?
Ohio Revised Code § 2117.06(B) states that all claims by creditors must be made within 6 months after the decedent’s death. O.R.C. 2117.06(A)(1) describes how creditors must present their claim(s) to the estate:
- To the Fiduciary in writing;
- To the Fiduciary in writing AND filing a copy of the claim with the Probate Court;
- In writing and sent by regular mail service addressed to the Decedent that is actually received by the Fiduciary.
Exception 1: This 6 month period can be shortened if the Fiduciary gives written notice of the Decedent’s death to a creditor and informs the creditor that any claims must be made within 30 days from this notice. O.R.C. § 2117.07
Exception #2: If a lien holder has a valid claim that is admitted to public record and fails to present a claim, this will not affect the valid lien. O.R.C. § 2117.10 This would be like a mortgage company that has a valid and recorded mortgage on real estate. If they fail to present a probate claim their lien will still exist.
Exception #3: The state of Ohio has up to 1 year to make a claim for benefits paid for medical benefits such as Medicaid payments.
If a claim is made by a creditor and the Fiduciary does not agree with the debt, the claim can be challenged. The Probate Court will ultimately decide if the claim is valid and shall be paid.
Which Debts of the Estate Get Paid First?
One thing to realize when dealing with debts of the estate is that not all debts are treated equally. O.R.C. § 2117.25 lays out the order or priority in which debts are paid:
1. Costs and Expenses of Administration. This would include Probate Court costs, attorney fees and other costs associated with the probate process.
2. Funeral, Burial and Cemetery Expenses. The first $4,000 for a funeral bill and the first $3,000 for burial expenses are paid next. If the total bill for these two costs exceed these amounts, the remaining balance is paid out later.
3. Support Allowance. This amount of property is set aside and is protected from the creditors. The support allowance is determined according to O.R.C. § 2106.13.
4. Federal Claims. These are typically debts owed to the Federal Government like taxes.
5. Expenses of the Last Sickness. This would include medical bills and nursing care costs incurred right before the passing of the Decedent.
6. Additional Funeral Bills. If the funeral bill was greater than $4,000, then up to another $2,000 can be paid towards the funeral bill.
7. Expenses for Deceent’s Last Continuous Stay in a Nursing Home. The last continuous stay includes up to 30 consecutive days during which the Decedent was temporarily absent from the nursing home, residential facility, or hospital long-term care unit.
8. Monies due to the State of Ohio. These debts include personal property taxes, claims made for medical assistance (Medicaid), and any other debts owed to the state or its subdivisions.
9. Wages to Decedent’s Employee. Debts for manual labor performed for the Decedent (a) within the 12 months prior to Decedent’s death and (b) up to $300 per person.
10. All Remaining Debts. This is the catch all category includes all of the debts not previously listed.