Handling Claims Against the Estate in Maryland

There are many things to consider when acting as a personal representative or executor of a deceased’s estate in Maryland. While you will naturally want the deceased’s closest friends, family, and beneficiaries to receive as much of the estate as possible, you are also responsible for handling claims against the estate in Maryland probate courts. Knowing which claims are valid, and the priority of payment is essential to a proper administration of the deceased’s estate.

When Can Creditors File Claims Against the Estate of the Deceased?

Creditors and any other interested parties may file claims for payment of their debts within six months of the decedent’s death. Creditors may seek to collect the unpaid balance owed on their debts. Maryland law allows the deceased’s next of kin an opportunity to contest the will you filed with the probate court. The federal government, including the IRS, has its own deadlines.

This time period can be cut short by sending the creditor a Notice to Creditors. As the personal representative, one of your duties is to go through the deceased’s financial records, bank statements, and bills, to identify all the creditors and debtors of the estate. Then you can provide those creditors notice that a probate case has been filed that will resolve their claims against the estate. In Maryland, this is most often done by sending a written notice to the creditors you find in your search, and publishing a Notice to Creditors in the local newspaper once a week for three weeks to notify any creditors you may have missed. The Notice to Creditors should include:

• The deceased’s identity
• The fact that the person has died
• Notice that a probate proceeding has begun
• The jurisdiction or court where the probate case is being heard
• Your name and contact information as personal representative
• Instructions for filing a claim against the estate
• The deadline for filing
• Warning that failure to file a claim before that deadline could result in that claim being barred.

Once you complete this process, creditors only have two months from the date you mail them the Notice of Creditors or three months from the date of publication to file their claim against the deceased’s estate.

Prioritizing Debts Owed by a Deceased’s Estate

Federal and state laws control the order in which a deceased’s debts must be paid after their death. If a deceased’s estate is not large enough to cover all their financial obligations, lower priority debts may not be paid until the higher priority debts are satisfied, and may never be paid at all. As personal representative, it is your responsibility ensure that each debt is given its proper priority:

1. Probate Fees. This includes court costs, fees imposed by the Maryland probate court, fees for certified copies of orders or Letters of Administration, and mail costs for serving notices and other court paperwork.
2. Claims by the United States. While the language of this federal statue is absolute that these expenses are to be paid first, federal cases allow an exception for reasonable funeral and estate administration expenses.
3. Funeral and Burial Expenses. This includes paying for funeral services, cremation, burial plot and headstone, and other related expenses.
4. Administration Costs. These are costs related to the administration of the estate, including your compensation for your work as personal representative, real estate fees for liquidating estate assets, and attorney fees paid to a probate attorney to assist in resolving the estate.
5. Family Allowances. This includes the statutory claims a deceased’s surviving spouse, registered domestic partner, and surviving unmarried minor children have against the estate.
6. Taxes. Outstanding income and property taxes. As personal representative, you have an obligation to file the estate’s final tax return and settle any outstanding tax debt before distributing the estate.
7. Medical Expenses for treatment, hospitalization, and nursing services incurred during the deceased’s final illness.
8. Rental Expenses for up to three months of past-due rent.
9. Wages, Salaries and Commissions for services performed for the deceased during the three months prior to their death.
10. Public Assistance Costs paid under the Maryland Public Assistance to Adults Program.
11. Child and Spousal Support Arrearages. Generally Maryland child support and spousal support terminate on the death of the payer. However, if the deceased had any unpaid arrearages, those must be paid out of the estate.
12. Secured Debts such as mortgages and car loans.
13. Unsecured Debts like credit cards.

As a personal representative, you have the authority to negotiate with creditors who file valid claims under any of these categories, attempt to reach a settlement (minimizing how much the estate has to pay), and then distribute the amounts owed from the deceased’s estate. All these transactions should be recorded in a supplemental accounting, that is filed with the Maryland probate court.

Disputing Invalid Claims Against the Estate

As a personal representative, you have the ability to disagree with claims filed by creditors by filing a Notice of Disallowance with the Maryland Probate Court. This may occur when you believe that the claim is uncollectable under Maryland law, or the debt has already been paid. The specifics of contesting creditor claims against a deceased’s estate are beyond the scope of this blog post. It is important for personal representatives to work with an experienced probate attorney to identify defenses to any creditors’ claims and preserve the deceased’s assets so they can be passed to their beneficiaries and loved ones as directed in their Will or Maryland intestacy laws.

Contact an Experienced Maryland Probate Attorney

If you have been appointed personal representative of a loved one’s estate, it’s vital to have the representation of a diligent probate attorney to help you identify and notify creditors, negotiate settlements, and resolve the estate’s debts. The Law Office of Henry Nash provides adept counsel for probate and a wide variety of estate matters in Maryland, and can help you preserve your loved one’s assets and honor their wishes. Contact us online or call (301) 681-6274 to schedule a consultation at our Rockville Office.