When an executor starts settling an estate, creditor settlement is an important part of the process. After notifying all known creditors of the individual’s passing, the executor might receive claims from some creditors for outstanding accounts.
It is important to understand the process for reviewing and settling those claims.
Communicate with creditors
The role of the executor is as much about communication as administration. Keep creditors informed about the estate administration process, including any delays that arise. This reduces the risk of potential conflicts and addresses complications early.
Review the claim for authenticity
Upon receipt of any claim against the estate, the first step is ensuring its validity. Review the claim carefully to ensure that it is legally enforceable and a valid claim. If any statute of limitations applies, ensure that it has not expired. The creditor should also supply sufficient documentation to support the claim, including account statements and records of the transaction.
Prioritize outstanding claims
Before creditors receive payment, the executor prioritizes them by type. Secured debts often receive priority in asset allocation.
Issue creditor payments
Once the executor prioritizes verified claims, they issue payments to the creditors using the assets of the estate. If the estate has insufficient assets for the debts, the estate is often considered insolvent and those debts go unpaid.
With the median net worth in the United States exceeding $121,000 according to Business Insider, it is important to understand how estate administrators distribute those funds. Understanding the process for creditor claim management is a key factor.