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 Washington, the executor has the option to publish a notice to creditors once a week for 3 consecutive weeks in a newspaper of general circulation in the settlement county, announcing the executor appointment and setting a deadline for claims of 4 months from the date of first notice publication.
If publishing a notice, the executor may also mail a copy of the notice to any known or reasonably ascertainable creditor, and must also mail a copy of the notice to the state of Washington Department of Social and Health Services Office of Financial Recovery.
The effect of the notifications is to reduce the potential claim period from 2 years to 4 months or even less.
If a notice was published, the executor should file with the court an affidavit of the notification.
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 Washington, creditors have 24 months from the date of death to file claims against the estate.
If the executor has notified creditors in accordance with Task: Publish Notice of Death, then this period may be shortened to only 4 months from the date of the first notice publication, or 30 days from individual notification, whichever comes later. If a creditor was reasonably ascertainable and did not receive an individual notification, then the default 24 month deadline still applies.
Within these limits, Washington maintains a 3-year statute of limitations on open account debts (Revised Code of Washington § 4.16.080), 4 years for contract sales such as vehicle purchases (Revised Code of Washington § 62A.2-725), and 6 years on contract debts (Revised Code of Washington § 4.16.040), all from original due date or most recent payment, whichever is later.
Note that these limits do not apply to secured loans such as mortgages.