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2 times executors could be liable for an estate’s unpaid debts

On Behalf of | Jun 5, 2023 | Estate Litigation |

An executor, personal representative or administrator of a California estate has numerous obligations that they must fulfill. Not everyone is capable of serving in that role, which is why testators often think carefully about who to name to carry out their last wishes. The executor of an estate has to abide by state law while also acting in a manner that reflects the estate planning documents the testator created.

Before they hand out estate assets to beneficiaries and finalize the probate process, they will first need to settle the decedent’s financial obligations. Creditors can sometimes take legal action against the executor of an estate if they have failed to follow the right process during estate administration. When can a business or other creditor hold the executor of a California estate responsible for a debt owed by the decedent?

When they fail to send notice

Providing written notice to creditors and distributing estate funds to them are both basic estate obligations that some executors will fail to fulfill. Creditors not aware of probate proceedings may not be able to file probate claims to obtain repayment. Sometimes, when creditors do get left out of the estate administration process, they find out in time to assert their rights. Frequently, however, their only option may be to take action seeking to hold the executor responsible for failing to adhere to state law. If an executor distributed assets to beneficiaries before paying creditors or without providing creditors with notice, they may end up responsible for the balances still owed after the end of the probate process.

When they mismanage estate resources

An executor typically needs to be careful about how they handle the estate’s assets and ensure that they get an appropriate price for them when selling them, as beneficiaries could seek their removal for failing to do so. Occasionally, it will be creditors who make a claim that an executor mismanaged resources. For example, perhaps they sold the real property from the estate to one of the beneficiaries for a third of its fair market value. The creditors could challenge that inappropriate transaction and the money that it cost the estate. The low sale amount effectively prevents creditors from having assets that they can make a claim against.

Recognizing when a business or another creditor can take action against an executor could help those who are owed money by someone who recently died to seek repayment in full.