Estate Debts and Claim Limitations
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 Vermont, the executor must usually publish a notice to creditors in a newspaper of general circulation in the probate district, within 30 days of the executor appointment, announcing the appointment and notifying creditors that they have 4 months from the date of publication to make any claims.
The executor must also mail a copy of the notice to all known or reasonably ascertainable creditors.
The executor must provide a copy of the notice to the court within 14 days of publication. The executor can seek a publication waiver if desired, for estates that are <$2500, for estates which have no debts, or for solvent estates whose debts are completely known.
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 Vermont, creditors have 1 year from the date of death to file claims against the estate.
However, if the executor has notified creditors in accordance with Task: Publish Notice of Death, then creditors have 4 months from the date of the notice publication.
Within these deadlines, Vermont maintains a 6-year statute of limitations on general debts, from original due date or most recent payment, whichever is later (see 12 V.S.A. § 23-511). Contracts for sale are handled according to Uniform Commercial Code guidelines, and have a 4-year limit (see 9A V.S.A. § 2-725).
These deadlines do not apply to secured loans such as mortgages.
See 14 V.S.A. § 1203.
See also Taking Inventory and Resolving Debts.