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 Wisconsin, the executor must place a class 3 notice in a newspaper published in the settlement county within 15 days of executor appointment, announcing the appointment and notifying creditors that if they wish to make a claim against the estate they have until the deadline set by the court (normally 3-4 months after appointment).
The executor should also directly give notice to any known or reasonably ascertainable creditors at least 30 days before the expiration of the above deadline, since the deadline will not be enforced in their cases without such notification.
Finally, there are some government agencies that must be notified depending on the decedent's situation, as listed in WI Stat § 859.07(2).
See WI Stat § 859.07.
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 Wisconsin, creditors must file any claims before the deadline set by the court clerk, typically 3-4 months after executor appointment.
This deadline does not apply to creditors which did not know of the deadline at least 30 days in advance, were not directly notified by the executor at least 30 days in advance, and of which the executor was aware prior to the deadline.
This deadline also does not apply to secured loans such as mortgages.
Within this deadline, Wisconsin maintains a 6-year statute of limitations on general debts, from original due date or most recent payment, whichever is later (see WI Stat § 893.43). Contracts for sale are handled according to Uniform Commercial Code guidelines, and also have a 6-year limit (see WI Stat § 402.725).