In the probate process, it is procedure to send out a Notice to Creditors to the Department of Health Care Services, Franchise Tax Board, Internal Revenue Service, and, if applicable, the California Victim’s Compensation Board (if any heir/beneficiary is incarcerated). Depending on your office procedure, this can be done with a letter or the Notice to Creditors, or both. I prefer to use the Notice to Creditors form with a cover letter, complete the proof of service, and then file the Notice to Creditors with the court.
Each agency may send you a letter stating they have no claim. Or you may not receive anything from that agency.
If the Department of Health Care Services has a claim, they will send an official letter with the amount and other instructions, will file a formal Creditor’s Claim with the court, and will also file a Request for Special Notice (add them to your proof of service).
What do you do if you have insufficient funds to pay the claim?
First, contact the Department of Health Care Services. There are instructions in the letter about how to contact the agency. Explain why there are insufficient funds. The person handling this matter will give you instructions on what to do, depending on the situation.
In my example, the administrator had no knowledge that the decedent had a reverse mortgage on her residence, the only asset of the estate. The home sold for $355,000. However, the payment of the mortgage loan was $300,000. The creditor’s claim filed by the Department of Health Care Services was for approximately $59,000. After payment of closing costs, payment of the mortgage and property taxes, the sales proceeds were approximately $35,000.
What the Department of Health Care Services required in this instance, was that an accounting be prepared indicating there were insufficient estate assets to pay the creditor’s claim from the Department of Health Care Services. The accounting would show there were insufficient estate assets to pay the creditor’s claim and the creditor’s claim would be waived.
The Department of Health Care Services would receive a copy of the Petition for Final Distribution with the Accounting because they had filed a Request for Special Notice. Additional wording in the Order Settling First and Final Account and Report of Administration and for Final Distribution could be that the creditor’s claim filed by the Department of Health Care Services cannot be paid due to insufficient estate assets.
As part of the procedure, sending a copy of the filed-stamped order to the Department of Health Care Services would complete your due diligence in providing all the information necessary to have the claim waived.
Note: this is only the viewpoint and experience of the writer. Each circumstance may be influenced by other factors.
Categorized in: Legal Procedure
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