After a person passes away, anyone who believes the decedent owed them money or property at the time of the decedent’s death may file a claim against the estate. Claims against an estate can include a wide range of debts, including but not limited to mortgages, credit card debts, loans, unpaid wages, medical bills, and legal fees. Whether you are representing a personal representative or claimant – or perhaps the claimant yourself – an understanding of the regulations regarding claims against estates is crucial when involved in an estate.
Presentment of Claims
A claim against the estate made by a decedent’s creditor must be presented within the earlier of the following dates: either (a) six months after the date of the decedent’s death, or (b) two months (30 days for small estates) after the personal representative mails or otherwise delivers to the creditor the required creditor notice, notifying the creditor the claim will be barred unless the claim is presented within two months. The exception to this rule is with claims filed by the Department of Health and Mental Hygiene (DHMH), which has an extended time for presentment of claims. The DHMH may file a claim against an estate up to six months after publication of notice of the first appointment of a personal representative (as opposed to six months from date of death), or two months after the personal representative mailed a copy of the required notice to the Division of Medical Assistance Recoveries. The guidelines regarding the time for presentment of claims is established in Estates & Trusts § 8-103.
A claim is filed on Register of Wills Form RW 1128. The claim must be (1) served on the personal representative, (2) filed with the register of wills and a copy mailed to the personal representative, or (3) by filing suit against the personal representative. Ordinarily, a claim is filed with the register and a copy mailed to the personal representative.
As a practical matter, claims may be filed prior to the appointment of a personal representative in the county where the decedent was domiciled, in any county where the decedent resided on the date of death, or in the county in which the decedent owned real property. This can be vital to protect a claimant’s interest in the event an estate is not opened until after six months following death. When an estate is not opened until after the six month claims period, claims against the estate are still barred. The procedures regarding the presentment of claims can be found in Estates & Trusts § 8-104 and Md. Rule 6-413.
Disallowance of Claims
Pursuant to Estates & Trusts § 8-107 and Md. Rule 6-413(d), after a claim against the estate is property presented, the personal representative has the option to either pay the claim or file a disallowance of the claim. A claim may be disallowed for any reason. Common reasons for claims being disallowed include claims filed after the time for presentment, claims that were filed in error, or due to a dispute regarding the amount or legitimacy of the claim. The personal representative has a fiduciary duty to disallow a claim that is filed subject to disallowance. A claim may be disallowed at any time before the filing of a final account. A disallowance should be completed and filed using the Register of Wills Form RW 1129.
In the event a personal representative is unsure whether a claim is valid, but prefers to not outright disallow a claim, the personal representative may petition the Orphans’ Court to make a determination as to the validity of the claim. Obtaining a Court Order before paying a questionable claim provides the personal representative with extra protection.
Petition for Allowance of Claims
As set forth in Estates & Trusts § 8-107(b) and Md. Rule 6-413(f), once a disallowance of claim is filed by the personal representative, a creditor whose claim has been disallowed has 60 days after the mailing of the disallowance to file a petition for allowance of claim. Following 60 days, the claim is forever barred. Upon the filing of a claimant’s petition for allowance of claim, pursuant to Md. Rule 6-413(g), the Orphans’ Court will set in a hearing to determine the claim’s validity.
At any time, a personal representative may negotiate with a creditor. According to Estates & Trusts § 7-401(h), a personal representative has the power to pay or compromise claims. Many creditors will agree to a compromise where the personal representative pays a creditor at a reduced amount in exchange for an expedited payment of the reduced claim.
Payment of Claims and Priority of Claims
While a personal representative may pay a claim at any time, should the estate subsequently be rendered insolvent, then the personal representative could be exposed to personal liability to unpaid creditors. When an estate is insolvent, the personal representative must make payments based on the priority of claims as set forth in Estates & Trusts § 8-105(a). The order of payment in insolvent estates is as follows:
- Fees due to the register;
- Costs and expenses of administration;
- Funeral expenses as provided in § 8-106 of this subtitle;
- Compensation of personal representatives as provided in § 7-601 of this article, for legal services as provided in § 7-602 of this article, and commissions of licensed real estate brokers;
- Family allowance as provided in § 3-201 of this article;
- Taxes due by the decedent;
- Reasonable medical, hospital, and nursing expenses of the last illness of the decedent;
- Rent payable by the decedent for not more than three months in arrears;
- Wages, salaries, or commission for services performed for the decedent within three months prior to death of the decedent;
- Assistance paid under the Public Assistance to Adults Program, as provided in § 5-407(d) of the Human Services Article; and
- All other claims.
When an estate is insolvent, the amount allowable for funeral expenses (priority number 3) is $15,000 for estates where the date of death was on or after October 1, 2015 ($10,000 when the date of death was before that date).
Meeting of Creditors
Pursuant to Estates & Trusts § 8-105(b), no preference may be given in a payment of a claim over another claim of the same class. When this occurs in insolvent estates, the personal representative has the option to request the Orphans’ Court to set a meeting of creditors with the goal to determine a pro rata share for each creditor of the same class. The approval of all or part of the claims of the creditors participating in the meeting is made under the direction of the Orphans’ Court, thus protecting the personal representative from potential liability. The procedures regarding the meeting of creditors are set forth in Estates & Trusts § 8-109 and Md. Rule 6-441.
Lawsuits Against Decedent
If an action for personal injury or property damage against a decedent was commenced, and the decedent served, prior to death, that cause of action may continue without the need for the plaintiff to file a claim against the estate.
When a claim survives death, the claimant is not required to present a claim against the estate to initiate an action against the estate. However, the cause of action must be commenced within the time limit for filing a claim against the estate. Of note, if the decedent carried insurance that provided coverage for the occurrence, a plaintiff may bring an action against the estate outside of the time for filing claims against the estate. However, the amount recoverable is limited by the amount of the insurance policy, and the action must be commenced during the regular limitations period for such a claim. Lawsuits against the decedent are governed by Estates & Trusts § 8-103(e) and 8-104(d) and (e).
Zachary W. Worshtil is an attorney at the Law Office of Ralph W. Powers, Jr., P.C. He is also a member of the PGCBA Board of Directors and co-chair of the Probate, Estates, Trusts & Elder Law Section. He concentrates his practice primarily in estate administration and probate litigation.