Estate Planning, Probate & Elder Law Attorneys

» 5 Tips for Dealing with Claims: Tip 1

1. The first thing you have to ask yourself is, "should we even open a probate estate right now?" If a decedent's estate appears insolvent (that is, the value of the potential claims exceeds the value of the decedent's property), maybe you never open an estate. Or, maybe you wait for two years to open it. Two years is the magic number because, under Section 18-12 of the Illinois Probate Act, most claims are barred as of that date (even if no probate was opened).

The question in these cases is whether the hardship (of not opening the estate for two years) outweighs the benefit (potential claims avoidance). Opening a probate estate, and getting a personal representative appointed, means that someone is entitled to deal with the decedent's property (including sell it). But some families are in a position where the money isn't needed ASAP, and the status quo is fine. In those cases, no probate for two years may mean the claims all go away. (Creditors can in some situations open a probate estate, but most creditors don't want to go to the trouble to do so.) For instance:

Tom dies owning a $200,000 bank account. Tom owes $30,000 in credit card bills. Upon Tom's death, his Will gives his property to his two siblings, Jean and Janet. Jean and Janet can:

-open an estate now, knowing that they'll get $170,000 (because the credit card company will probably file a claim); OR

-let the bank account sit for two years, hope that the credit card company doesn't seek to open the probate estate on their own, and then open a probate once the two years have passed. If all goes according to plan, Jean and Janet get the full $200,000.

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» 5 Tips for Dealing with Claims: Tip 5

Let's say that you've followed tips 1-4, and the claimant still won't go away. What choices do you have? There are two, really:

1. Settle; or

2. Go to trial.

Tip #5 is to try and settle the claim.

When real life people have debt, it can be a big pain. You are, in many ways, at the mercy of bill collectors. If you fail to make a payment, they can ruin your credit rating, making it difficult for you to rent or purchase a home (or, perhaps, get a job). They can also be an incredible nuisance, calling at all hours of the day.

By contrast, dead people (or their representatives) have a number of advantages over creditors:

a. They don't care about their credit rating -- it's irrelevant.

b. Wherever you go when you die, I doubt you receive calls from bill collectors.

There's also the advantage of time, which is usually seen as a disadvantage but may be a real asset. Most creditors want their money ASAP. But most creditors understand enough about probate to know that the release of funds takes time. That makes them willing to accept much less than the amount owed if they can get the money right away. For instance, a credit card company with a claim of $10,000 may be able to accept $7,000 or $8,000 (or even less) if they can receive payment ASAP. There's only one way to find out, and that's by asking for a discount. The worst thing that can happen is the creditor tells you "no."

One final note: if you do settle for less than the value of the debt, the difference between the debt amount and the settlement amount is income to the estate (as forgiven debt).

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» Is a quitclaim deed needed to give property to heirs after my death?

Quitclaim deeds can be used to transfer property, such as a house or land, to heirs either by sale, exchange or gift.