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 is often required to advertise for creditors by publishing 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 province to province, creditors typically have from 1 to 6 months to contact the estate about any debt claims. If a potential creditor misses the claims deadline then the executor is protected from personal any personal liability related to the debt, and in some provinces, the creditor's debt would be completely invalidated (see Sample Estate: Task - Debt Claims Expired).
Even if the estate is small enough to avoid probate, or the probate notice is not required, 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 Quebec, once the inventory of succession assets is complete, the liquidator must publish a notice of closure of inventory in a newspaper circulated in the locality of the deceased's legal residence, as well as notify anyone designated to inherit in the will, any heir who would inherit if there were no will, and any known creditors, informing them where the inventory may be reviewed (often at the decedent's home).
You must also register this notice within 6 months of the death with Le Registre des Droits Personnels et Réels Mobiliers (RDPRM), using a General Application for Registration (Form RG). And if the will contains stipulations of exemption from seizure (to protect succession property from being seized by an heir's creditors to satisfy the heir's existing debts), the liquidator must also register this protection with the RDPRM for it to become enforceable.
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 provinces 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 2 to 6 years for unsecured debts (such as credit cards), and sometimes even longer 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 sometimes shortened in provinces where creditor notices put strict time limits on claims, and bar any claims after that period has expired (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.
In Quebec, a creditor normally has 3 years to make claims concerning most unsecured debts (see Civil Code of Québec, CQLR c CCQ-1991, s 2925). This 3-year period resets whenever a debtor acknowledges a debt, so as an QC liquidator, you must be careful about inadvertently revitalizing a debt that was about to expire (see Civil Code of Québec, CQLR c CCQ-1991, s 2898).
However ... if a liquidator has properly notified known creditors and published a notice of closure, then a creditor cannot make a claim after the succession property has been lawfully distributed. See Civil Code of Québec, CQLR c CCQ-1991, s 816.