Personal representatives are tasked with many important responsibilities when it comes to estate administration in South Carolina. Among these responsibilities is properly addressing creditor claims. Proper notice must be provided to potential creditors of the estate and proper payment of valid creditor claims must be made. This is a key part in the estate administration process as well as the part that can take the most time to complete.
Creditor Claims During Estate Administration in South Carolina
In South Carolina, the personal representative of an estate must put creditors on notice of estate administration proceedings. Creditors, in turn, are obligated to make claims against the estate within either one year after the death of the decedent or eight months after the date that notice to creditors was first published, whatever happens first. Failure to make a claim in a timely manner risks the claim being waived and remaining unpaid.
It is critical for personal representatives to be aware of the fact that South Carolina law dictates a priority in which creditor claims against an estate must be paid. This means that personal representatives should avoid paying claims as they roll in. This method risks depleting estate assets and risking not being able to pay a creditor that has a higher priority claim than those that have already been paid. In this situation, the personal representative may be held personally liable for paying the higher priority claim.
Before paying out on any claims, the personal representative should understand the priority of claims. Paying claims in the wrong order means risking personal liability for higher priority claims should they be left unpaid after lower priority claims have been paid. If claims are paid in an incorrect priority order, a personal representative may attempt to negotiate them down to a more reasonable amount, but there is no guarantee that this method may work. As such, the personal representative could be personally on the hook for the payment of a sizeable, high priority claim. Generally speaking, however, the personal representative may try to negotiate with any creditor of the estate in an attempt to reduce the claim amount. A creditor may file a claim against the estate for a certain amount, but may still be open to negotiating.
For payments to creditors, the funds should come from assets included in the probate estate. Payments should not be made from any property the decedent may have had that fell outside of the probate estate. Such assets that are not part of the probate estate may include life insurance proceeds and trust funds, among other assets. Creditors have no right to non-probate assets. As such, the personal representative should be clear as to what is included in probate assets as opposed to non-probate assets to help ensure creditors are only paid from probate assets.
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