After Someone Dies What Happens to Their Creditor Debt in Tennessee? Who is Responsible to Pay the Debt?

An individual who dies who owes money to creditors is largely still responsible for that debt after they are deceased.  Specifically, their estate owes the money to the creditors.  Many people are confused about this.  It is important to note that if nobody else was a co-signor or legally responsible for the debt, then family members, even spouses are not necessarily responsible for the debt.  Be very careful when receiving creditor collection calls after your loved ones passing because often they will try to get others to pay the debt of the deceased – often these individuals are not actually legally responsible for this debt.  

Required Notice to Creditors:

If a probate estate is opened up for a deceased person, then the creditors are put on notice of the opening of the estate and they have a certain amount of time (generally 4 months) to file a claim against the estate. See T.C.A. § 30-2-306.  This is a formal requirement and requires an actual filing of the claim in the Tennessee probate estate.  Any and all known creditors must be specifically sent notice of the opening of the estate. See T.C.A. § 30-2-306.  Additionally, an advertisement must be placed in a newspaper on two consecutive weeks to put additional creditors on notice. See T.C.A. § 30-2-306.  If the creditors do not file a claim with the estate within the appropriate statutory time period then their claim can be completely waived.  Additionally, if a probate estate is not opened up in a timely fashion then creditors can actually open up an estate in order to make sure they collect on the amount of money that is owed to the creditor.  Of course this only makes sense if there are actual assets in the estate.  

Creditor Claims Are Extinguished After 12 Months Post-Death:

One other very important thing to know is that if an estate is not opened up until greater than 12 months after death, then you are not required to provide a notice of creditors and the creditor claims against the estate are considered to be expired (except for TennCare).  For this reason, it is extremely important that if you have a claim aga...

Debtor and creditor notice requirements for the administration of a Tennessee probate estate.

Tennessee law requires the provision of notice to debtors and creditors after an individual dies and a probate estate is opened.  T.C.A. § 30-2-306 requires the personal representative (the Executor, Executrix or Administrator of the probate estate) to provide notice to all creditors with "whom the personal representative has actual knowledge or who are reasonably ascertainable by the personal representative, at the creditor's last known address."  The complete requirements are listed in T.C.A. § 30-2-306(d) which provides as follows:

(d) In addition, it shall be the duty of the personal representative to mail or deliver by other means a copy of the published or posted notice as described in subsection (b) to all creditors of the decedent of whom the personal representative has actual knowledge or who are reasonably ascertainable by the personal representative, at the creditors' last known addresses. This notice shall not be required where a creditor has already filed a claim against the estate, has been paid or has issued a release of all claims against the estate.

Additionally, the clerk of the court where the estate is administered is required to provide public notice to creditors and debtors within 30 days after the issuance of letters testamentary or administration.  This notice is to be provided in a newspaper or public place pursuant to the statute.  The specifics of T.C.A. § 30-2-306(a) are as follows:

(a) Except as provided in subsection (e), it is the duty of the clerk of the court in which an estate is being administered, within thirty (30) days after the issuance of letters testamentary or of administration, to give, in the name of the personal representative of the estate, public notice of the personal representative's qualification as such by two (2) consecutive weekly notices published in some newspaper of the county in which letters testamentary or of administration are granted, or, if no newspaper is published in that county, by written notices posted in three (3) public places in the county, one (1) of which shall be posted at the usual place for posting notices at the courthouse.

This statute makes it clear that it is the duty of the personal representative to identify known creditors and to investigate potential creditors of the estate.  This does not require a search to the ends of the earth, but does require a reasonable...

In Tennessee when is a surviving spouse required to make an election to receive an elective share against the estate?

A surviving spouse can choose to receive an elective share (see prior post describing the details of an elective share under Tennessee law) of the decedent's property by filing a notice with the court and delivering the notice to the personal representative.  The surviving spouse must file a petition for an elective share within nine months after the date of the death.  T.C.A. § 31-4-102(a)(1) provides as follows:

(a)(1) The surviving spouse may elect to take the spouse's elective share in decedent's property by filing in the court and mailing or delivering to the personal representative, if any, a petition for the elective share within nine (9) months after the date of death.

Additionally, an extension of this time limit is provided in the statute if there is litigation pending about the title of the surviving spouse to property devised or bequeathed by the will such that an elective share determination could not be made with sufficient information.  If this type of litigation exists then the surviving spouse has an additional year from the date of the probate of the will within which to elect.  Additionally, the court can extend that date further due to the litigation if requested.  T.C.A. § 31-4-102(a)(2) provides as follows:

(2) When the title of the surviving spouse to property devised or bequeathed by the will is involved in litigation pending so that an election to take the elective share cannot be advisedly made, the survivor shall have an additional year from the date of the probate of the will within which to elect; provided, that the court may upon a proper showing further extend the time to meet the exigency of litigation, not concluded, and, that application for allowance of additional time, in either case, be made to the court, for record of its action thereon.

The surviving spouse may also withdraw a demand for an elective share at any time for the entry of a final determination by the court under T.C.A. § 31-4-102(c).  Obviously factual circumstances can change as the estate moves through the Tennessee probate process. ...

Creditor Claims Against Estate- What happens if the estate fails to file timely objections to a creditor’s claim in a Tennessee probate estate?

The recent Tennessee Court of Appeals decision of In Re: The Estate of Rosalynn Karesh, No. W2012-00181-COA-R3-CV, 2012 WL 6562025 (Tenn. Ct. App. December 17, 2012) discussed the impact of untimely exceptions or objections to a creditor's claim.  The court noted that under T.C.A. § 30-2-314(a) the estate has a right to file written objections to any creditor claim that is filed against the estate.  Karesh at 4, 5.  This statute, T.C.A. § 30-2-314(a) specifically mandates that, “each exception shall include a reasonably detailed explanation of the ground or grounds upon which the person making such exception intends to rely.”  Karesh at 5. 

The court noted that the failure to timely file an exception to a creditor claim has consequences specifically, "failure to except to a claim amounts to an admission of its justness; and the claim becomes, in effect, a judgment against the estate at the end of the statutory period."  Karesh at 4 (citing, Needham v. Moore, 292 S.W.2d 720, 723 (Tenn. 1956)).  As a result, this is a very important requirement.

In this Karesh case, the estate only filed objections to a specific creditor's claims on the basis the claims were untimely but did not provide any specific objections to the actual merits of the claims. Karesh at 4, 5.  The estate did send a letter to the creditor discussing some objections but it was not filed with the Court within the appropriate time frame required under the statute.  As a result, the only objections timely filed with the Court were based on the alleged untimeliness of the creditor claim (which the court rejected).  As a result, the Appellate Court found that a written letter of substantive objections that was not filed with the court until after the time period passed for objections is not sufficient to properly raise objections to the credito...

What is the requirement for taking inventory of the decedent’s possessions and property in a Tennessee probate estate?

Tennessee law requires the personal representative (Executor, Executrix or Administrator of the estate) to make a complete and accurate inventory of the probate estate of a deceased within sixty days after being appointed the personal representative for the estate.  T.C.A. § 30-2-301(a) provides as follows:

(a) The personal representative, within sixty (60) days after entering on the administration of a testate or intestate estate, shall make a complete and accurate inventory of the probate estate of the deceased, and return the inventory to the clerk of the court exercising probate jurisdiction in the county of the estate, and verify it by the personal representative's oath before the clerk or before any person authorized by law to administer oaths in such cases whether within or without the borders of the state of Tennessee. When the will of the deceased excuses the requirement for making and filing an inventory of the estate, or when excused by all of the residuary distributees or legatees, no inventory shall be required of a solvent estate, unless demanded by any residuary distributee or legatee of the estate.

This inventory must be filed with the clerk of the court under oath.  However, under T.C.A. § 30-2-301, no inventory is required when the will of the deceased specifically excuses the requirement for the filing of an inventory for an estate (this is generally included in most wills that have been drafted over the last several years).  In the alternative, when all of the residuary distributees or legatees (commonly referred to as heirs) of an estate agree to a waiver of the inventory requirements, then the inventory requirement can be waived by the Court.  Otherwise, the inventory is an important component of the probate of an estate under Tennessee law and must be filed with the court within 60 days.

When must TennCare be notified of an individual's death under Tennessee law in the context of a probate estate?

Under certain circumstances, TennCare must be provided with notice by the personal representative of the death of an individual in the context of a probate estate in Tennessee.  T.C.A. § 30-2-301 provides that within sixty days of a personal representative's appointment as the personal representative, they are required to execute and file an affidavit with the clerk that the Bureau of TennCare has been notified of the decedent's death if they are older then 55 years of age or are a TennCare recipient.  T.C.A. § 30-2-301(b)(5) provides as follows:

(5) Within the sixty-day period, the personal representative shall execute and file with the clerk of the court an affidavit that the bureau of TennCare has been notified of the decedent's death pursuant to § 71-5-116.

T.C.A. § 71-5-116(c)(2) provides as follows:

(c)(2) Before any probate estate may be closed pursuant to title 30, with respect to a decedent who, at the time of death, was enrolled in the TennCare program, the personal representative of the estate shall file with the clerk of the court exercising probate jurisdiction a release from the bureau of TennCare evidencing either:

(A) Payment of all medical assistance benefits, premiums, or other costs due from the estate under law;

(B) Waiver of the bureau's claims; or

(C) A statement from the bureau that no amount is due.

Therefore, it is clear that when someone is enrolled in TennCare at the time of their death, a release must be filed with the court in the probate estate stating that TennCare has been paid all it is owed from the estate; or that TennCare has waived any claim; or that TennCare has stated that no money is owed. 

Who can object to a creditor claim filed against a probate estate in Tennessee?

T.C.A. § 30-2-314 provides that certain individuals can file objections to a claim filed by creditors against a Tennessee probate estate.  The personal representative of the estate, a creditor, heir, beneficiary or anyone else who has an interest in the estate can file an objection to a creditor claim.  This allows the contesting party to argue to the court that a specific creditor claim against the estate should not be allowed.  Specifically, this statute provides that:

the personal representative, or any party interested in the estate either as creditor, distributee, heir or otherwise, may except to the claim by filing written exceptions in triplicate with the clerk of the court in which the estate is being administered

The exceptions to the claim must be filed within thirty days after the “expiration of four (4) months from the date of the notice to creditors given as provided in § 30-2-306(b).”  If a creditor claim is filed against the probate estate after the four month time period allowed in T.C.A. § 30-2-306, then the notice of exception to that claim can be filed within thirty days from the time the personal representative receives notice from the clerk of the filing of the claim.

The exception to a creditor's claim must include a reasonably detailed explanation of the basis for which the person is making the exception.  T.C.A. §30-2-315 provides greater detail about the procedures for how the court determines whether a claim should stand or whether the exception should be upheld.  If you have a creditor claim or desire to object to a creditor claim, it is very important to have a Tennessee probate attorney assist with this process in order to properly comply with these statutes.

What type of notice is required to be provided to beneficiaries under a testate (will) or intestate (no will) situation in Tennessee?

Tennessee law requires that the personal representative for an estate must provide notice to beneficiaries under a will or to those entitled to receive distribution in an intestate situation (where there is no will) within sixty days after being appointed as the personal representative.  T.C.A. § 30-2-301(b)(1) provides as follows:

(b)(1) Except as provided in subdivision (b)(4), the personal representative, within sixty (60) days after entering on the administration, shall notify:

(A) Each legatee or devisee under the will that that person or entity is a beneficiary by sending, by first class mail or personal delivery, a complete copy of the will to those beneficiaries sharing in the residue of the estate, and by sending a copy of the paragraph or paragraphs of the will containing the bequests to those beneficiaries only receiving bequests; and

(B) Each residuary distributee of an intestate deceased person by sending that person a copy of the letters of administration.

After the notice has been provided to the beneficiaries the personal representative for the estate must provide, within the same sixty day notice period discussed above, notice to the clerk with an affidavit of compliance with the notice requirements under T.C.A. § 30-2-301.  Specifically, T.C.A. § 30-2-301(3) provides as follows:

Within the sixty-day period, the personal representative shall also execute and file with the clerk of the court an affidavit that the required copies have been mailed or delivered to the beneficiaries or distributees, and an explanation of efforts to identify and locate beneficiaries or distributees, if any, to whom copies have not yet been sent.

There is an exemption from the notice requirement when the personal representative is the sole beneficiary of the estate.  Compliance with the notice requirements is waived under T.C.A. § 30-2-301(4) in that situation.  Also, if the decedent's will was admitted to probate in solemn form then there is no requirement to notify under T.C.A. § 30-2-301.

How is an insolvent estate handled under Tennessee probate law?

Sometimes probate estates are insolvent which means the claims against the estate are greater than the assets in the estate.  In this situation T.C.A. § 30-5-102 requires the personal representative to file a notice of insolvency with the clerk.  A copy of that notice must be sent to all the creditors who have filed a claim.

Under T.C.A. § 30-5-103 the personal representative is then responsible to provide a proposed plan of distribution in accordance with T.C.A. §30-2-317.  T.C.A. §30-2-317 is the statute that governs the payment priority of all claims made against an estate.  T.C.A. § 30-5-103 provides as follows:

(a) The notice of insolvency shall contain an accounting of assets that have come into the hands of the personal representative and a proposed plan of distribution in accordance with § 30-2-317.

(b) The notice shall bear, in a conspicuous manner, the following language: “Objections to this proposed plan of distribution must be filed with the clerk within thirty (30) days from the date of receipt of this notice.”

(c) If no objections are filed within the thirty-day waiting period, the personal representative may execute the proposed plan of distribution and close the estate, relieving the personal representative of any further liability to the estate.

If there are any objections to the proposed plan of distribution than a hearing can be held pursuant to T.C.A. § 30-5-104 to determine if the proposed plan is appropriate.  After all of the objections to the plan of distribution are resolved, then distributions can be made and the estate can be closed under T.C.A. § 30-5-105.

What is the priority for claims or demands against an estate under Tennessee law?

T.C.A. § 30-2-317 provides a list showing the priority for any claim or demand against the estate of a deceased individual in Tennessee.  Claims and demands against an estate are divided into certain categories and the statue provides the order in which the claims or demands are to be paid.  Specifically, T.C.A. § 30-2-317 provides a priority for claims and demands as follows:

(a) All claims or demands against the estate of any deceased person shall be divided into the following classifications, which shall have priority in the order shown:

(1) First: Costs of administration, including, but not limited to, premiums on the fiduciary bonds and reasonable compensation to the personal representative and the personal representative's counsel;

(2) Second: Reasonable funeral expenses;

(3) Third: Taxes and assessments imposed by the federal or any state government or subdivision of the federal or any state government, including claims by the Bureau of TennCare pursuant to § 71-5-116; and

(4) Fourth: All other demands that may be filed as aforementioned within four (4) months after the date of notice to creditors.

Category number four is a catch-all category for any claims that are filed with the probate court for the debts of the deceased individual within four months of the notice provided to the creditors.  This statute also provides specific instructions to the personal representative of how to pay the claims according to the specific priority found in the statute.  T.C.A. § 30-2-317(b) provides as follows:

(b) All demands against the estate shall be paid by the personal representative in the order in which they are classed, and no demand of one class shall be paid until the claims of all prior classes are satisfied or provided for; and if there are not sufficient assets to pay the whole of any one class, the claims in that class shall be paid pro rata.

It is very important for the personal representative to be aware of the rules pertaining to the priority of payment for any claim or demand against the estate.  This is where a probate attorney can be very helpful to guide and advise the personal representative in this process so Tennessee