The New Jersey legislature updated the state's Probate Code effective Feb. 27, 2005. Prior to this, creditors had six months during the probate process to make a claim for any debts the deceased owed them. The clock now begins ticking on the date the deceased dies. Creditors have nine months from the date of death to make a claim for payment.
Under the old law, the executor of an estate had to apply to the surrogate's court for an "Order Limiting Creditors" after submitting a will for probate. The executor had to issue the order to the deceased's creditors, then wait six months for the creditors to make claims. Since February 2005, giving notice is no longer required. The statute of limitations runs for an additional three months, but creditors are responsible for making claims for their money without receiving the order notifying them of the time limit. If the executor does not receive a claim during the nine months after death, he can disburse the money in the estate to its beneficiaries without any liability to the creditor who failed to make one.
Payment of Claims
Just because a creditor makes a claim, it does not necessarily mean that the company will get all or even any of its money. In many cases, the executor will negotiate the debt downward. An executor can also deny a claim if he doesn't think it's valid. The creditor then has three additional months to file a complaint with the court to override the executor's decision. If an estate doesn't have sufficient money to pay all claims presented, some have priority over others. The executor pays funeral expenses first, then the costs of bringing the estate to closure, then any taxes the estate or the deceased owed. The executor next must pay debts secured by collateral, such as auto loans or mortgages. Medical bills associated with the testator's death come next, then the executor will pay any creditors who had judgments against the deceased for the money owed. Unsecured creditors receive their money last.
Any of the deceased's assets that do not pass through the probate process are exempt from creditor claims. For example, life insurance policies and retirement funds usually pass directly to a beneficiary, not to the deceased's estate. If assets are part of the estate, they're vulnerable to creditor claims. If they pass directly to a beneficiary, a creditor may not make a claim against the assets.
If you die without leaving a will in New Jersey, the state will oversee settlement of your estate. Your property passes to your heirs via New Jersey's order of intestate succession. Under the new legislation adopted in 2005, your spouse generally stands to inherit first. This doesn't preclude a creditor making claims against your assets and estate, however. If you have significant debts and you're concerned that they might whittle away any inheritance you want to leave to your loved ones, protect your assets by moving them into non-probate accounts, such as payable-on-death accounts, investment accounts and insurance policies that will move directly to your named beneficiary after your death.
- Augulis Law Firm; Protecting Your Inheritance From Creditor Claims; Alan Augulis; September 2010
- Mercer County Surrogate: Probate of Wills
- The Law Office of Olszak and Olszak: Estate Administration
- Tax and Estate Planning E-News; The New Jersey Probate Code Gets a Face-Lift; Capehart & Scatchard, P.A.; November 2004 (PDF)
- "The 'New' New Jersey Probate Code": Douglas A. Fendrick, LLC (PDF)
How to File a Claim Against the Estate of a Deceased
How to File a Claim Against the Estate of a Deceased. ... to find a new open time on ... New Jersey...
How to Write an Estate Notice for a Newspaper
Title the notice "Notice to Creditors," and include the name of the deceased, ... Time limits vary depending on the state law...
Statute of Limitations on Estate Laws in Tennessee
The executor is the person the deceased names in his will to submit it to ... The Statute of Limitations for Tennessee...
Can a Decedent's Estate File for Bankruptcy?
Can a Decedent's Estate File for Bankruptcy?. ... which is a reorganization of the debt through a multi-year repayment plan. ... How...
Requirements for a Claim on a Deceased Estate
The Law Office of Patrick C. Burpee, LLC: Pursuing a Creditor's Claim Against the Probate Estate of a Washington Resident; Patrick C....
New Jersey Labor Laws and Termination Rights
... Top 10 Reasons Not to Sue; ... Regardless of how much money you earn in the state of New Jersey, ......
How to Settle an Estate in New Jersey
How to Settle an Estate in New Jersey. ... You must advise them of her death and let them know they have...
New Jersey Probate Laws
New Jersey Probate Laws. With the state's easy-to ... What Are the Laws in New York State ... What Does a Statement...
Statute of Limitations for Wrongful Death
Statute of Limitations for Wrongful Death. The statute of limitations for filing a lawsuit ... and New Jersey, ... to pay for...