Estate Debts and Claim LimitationsShow Table of Contents
As part of taking inventory, an estate executor must look for and validate the debts of the decedent's estate.
Notice of Death Publication
If the estate is going through probate, the executor must typically publish a notice of death in the local newspaper where the decedent lived (see Sample Estate: Task - Publish Notice of Death). The purpose of this notice is designed to inform potential creditors of the death, and while details vary from state to state, creditors typically have 3 to 9 months to contact the estate about any debt claims. If a potential creditor misses the claims deadline then the estate would not typically have a legal obligation to pay the debt (see Sample Estate: Task - Debt Claims Expired). Note that debts to the federal government are often an exception to this rule.
Even if the estate is small enough to avoid probate, the executor may still wish to publish a notice of death, to protect the estate from future debt claims, which could be quite problematic if the estate assets have already been distributed.
In Florida, the executor must publish a notice to creditors once a week for 2 successive weeks in a newspaper published in or of general circulation in the decedent's home county, announcing the executor appointment and notifying estate creditors to present any claims within 3 months (after the date of first publication).
The executor must also directly notify all known and reasonably ascertainable creditors, telling them they have 30 days after the date of the individual mailing (or other delivery) to present any claims. Such notification is not required if the creditor has already contacted the estate, or the executor lists the debt in the executor's court filings.
If a decedent was 55 or older, the executor must also notify the Agency for Health Care Administration within 3 months after the first publication of the notice to creditors, unless the agency has already filed a claim in the estate proceedings.
Unlike many other states, the executor is not personally liable to a creditor for failing to give such notices, but failure to do so can extend the length of time during which creditors can make claims.
See FL Stat § 733.2121.
Informal Debt Claims
There are certain debts you will quickly discover as you go through the decedent's mail, or are contacted by creditors, such as insurance premiums, credit card balances, utility bills, and so forth.
If desired, you can also run a credit report on the deceased, perhaps discovering debts about which you would otherwise be unaware. You may be able to get the credit report for free if and when you notify the credit reporting agencies of the death.
You don't necessarily have to pay any of these debts unless the associated creditor makes a formal claim against the estate, potentially in response to the notice of death, but most executors will opt to do so in an attempt to "do the right thing". Moreover, failing to pay some of these ongoing bills may result in unwarranted harm to the estate (such as foreclosure or frozen pipes bursting): see Resolving Debts: Ongoing Bills.
In any case, these bills will likely continue to arrive over time, so it will likely be several months before you have a complete picture of all debts.
Statute of Limitations and Claims Deadlines
All states impose statutes of limitations on debts, meaning that after a certain amount of time passes from a debt's due date, the courts can no longer require the debtor to repay the debt. Typically, these time limits range from 3 years for open accounts (such as credit cards) to 10 years for contract debts.
When someone dies, these statutory limitations are often both extended and shortened. They can be extended in that the expiration period is often put on hold for a few months, so that everyone has a chance to get organized and sort things out. This "hold" is officially called "tolling" the debt, but is not usually a major factor since statutory limits are measured in years.
However, statutory limits are also shortened in that almost all states have mechanisms for the estate to establish a time limit for claim submissions measured in months, not years, and these shortened limits overrule any statute of limitations (in other words, even if a statute of limitations implies that a debt would still be enforceable, it will not be enforceable if the estate limits have kicked in). The section above on Notice of Death Publications explains how the estate can limit the exposure to debts.
Note that debts which become time-barred (i.e., become unenforceable due to the statute of limitations), are considered "cancelled" by the IRS, and generate a taxable event, which the creditor may report to via a Form 1099-C (see IRS: Taxes on Canceled Debt).
In Florida, creditors have up to 3 months from the first date of general creditor notice publication to make claims against the estate. If the creditor was directly notified, he or she has 30 days from the date of notification. If the general notice was not published, or the creditor should have been individually notified and was not, then the time limit is 2 years from the date of death.
Within these limits, Florida maintains a 4-year statute of limitations on open debts, and 5 years on contract debt (see FL Stat § 95.11). The countdown starts from the missed due date or the most recent payment, whichever is later.