If you are appointed as the executor of an estate in Colorado, whether as the Personal representative in a probate process or as the Trustee of a trust, one of your duties is to deal with the creditors of the deceased person. This can be a complex and time-consuming process. Still, it is essential to ensure that the estate is administered correctly and distributed according to the law and the will or trust of the decedent. In this blog post, we will explain your options for handling creditors' claims in Colorado probate and why it is essential to do so correctly.

What are creditors' claims?

Creditors' claims are the debts and obligations the deceased person owed at the time of death. These include mortgages, loans, credit cards, medical bills, taxes, and other liabilities. Creditors have the right to file claims against the estate to recover the money they are owed. However, not all claims are valid or enforceable, and some may have expired or been discharged by law. Therefore, it is the executor's responsibility to review and verify each claim and to pay or reject them accordingly.

How do we notify creditors of the probate?

For estates being administered through probate, the first step in dealing with creditors' claims is to notify potential creditors of the probate proceeding. This can be done in two ways: by publication and by mail.

• By publication: The executor must publish a notice to creditors in a newspaper of general circulation in the county where the estate is being administered. The notice must be published at least three times, once a week, for three consecutive weeks. The notice must contain the decedent's name, the case number, the name and address of the executor, and the deadline for filing claims. The deadline is usually four months from the date of the first publication or one year from the date of death, whichever is earlier.
• By mail: The executor may also give written notice by mail or other delivery to any creditor that they are aware of or can reasonably ascertain. The written notice must contain the same information as the notice by publication and notify the creditor of the time limit for filing claims. The time limit is the later of the following: the deadline set by the notice by publication, or 60 days from the mailing or delivery of the notice, but not later than one year from the date of death.

How do you handle creditors' claims?

Once the creditors are notified of the probate, they can file their claims with the court or the executor. The executor must review each claim and determine whether to allow or disallow it. The executor may allow a claim in whole or in part or reject it entirely. The executor must notify the creditor of their decision in writing within 63 days of receiving the claim. If the executor fails to do so, the claim is deemed allowed.

If the executor allows a claim, they must pay it from the estate's assets in the order of priority established by law. The order of priority is as follows:

• Costs and expenses of administration, including attorney's fees and executor's commissions.
• Reasonable funeral expenses.
• Debts and taxes with preference under federal law, such as income and estate taxes.
• Reasonable and necessary medical and hospital expenses of the last illness of the decedent, including compensation of persons attending the decedent.
• Debts and taxes with preference under other laws of this state, such as property taxes and sales taxes.
• All other claims.

If the executor disallows a claim, the creditor may file a petition with the court to contest the decision within 63 days of receiving the notice of disallowance. The court will then hold a hearing and decide whether the claim is valid.

Why is it essential to handle creditors' claims correctly?

The executor needs to handle creditors' claims correctly for several reasons.

First, it is part of their fiduciary duty to the estate and the beneficiaries to pay the lawful debts of the decedent and to protect the estate from invalid or fraudulent claims.

Second, it is necessary to avoid personal liability for the executor. If the executor pays a claim that is not valid or enforceable or pays a claim out of order, they may be liable to the estate or the beneficiaries for the amount paid. Conversely, if the executor fails to pay a valid and enforceable claim, they may be liable to the creditor for the amount owed.

Third, it is essential to ensure the proper distribution of the estate. Suppose the executor does not pay or reject the claims promptly. In that case, they may delay or prevent the final settlement of the estate and the distribution of the assets to the beneficiaries.

How can we help?

Handling creditors' claims in Colorado probate can be a daunting task for any executor. That is why it is advisable to seek the assistance of an experienced probate attorney who can guide you through the process and ensure that you comply with the law and protect the interests of the estate and the beneficiaries.

At The McKenzie Law Firm, we have the knowledge and expertise to help you with all aspects of probate and trust administration, including dealing with creditors' claims. Contact us today for a free paralegal consultation, and let us take care of your probate needs.