When someone passes away and their loved ones need to collect their assets, they will sometimes need to be appointed a fiduciary of the estate. The fiduciary of an estate oversees the collection of the decedent’s assets, paying their creditors, and distributing what remains to the estate’s distributees or beneficiaries. The fiduciary is be appointed by the court and issued Letters Testamentary or Letters of Administration (“Letters”) – this is the document that gives them the authority to act on behalf of the estate.
It is never good practice to make distributions from an estate before seven (7) months have passed from their appointment as it is ultimately the fiduciary’s responsibility to ascertain and pay any outstanding debts of the decedent. A decedent’s creditors could include medical bills, unpaid loans, rent, taxes, credit card bills, etc.
The Surrogate’s Court Procedure Act (the statute that controls the procedures for the appointment and administration of an estate) S.C.P.A. §1802 states that if a creditor of an estate fails to file a claim against the estate within seven (7) months of Letters being issued to a fiduciary, then that fiduciary will not be personally liable for any funds distributed to beneficiaries or distributees in good faith.
While some believe that creditors will be barred from filing a claim after seven
(7) months, this is a misinterpretation of the statute. A creditor may file a claim longer than seven (7) months after Letters have been issued to the fiduciary of the estate, but they may need to enforce the claim against the estate’s distributees rather than the estate or the fiduciary. This means that the fiduciary may not be personally liable for distributing funds from the estate before the creditor is satisfied.
Even if seven months have elapsed, if the fiduciary makes a distribution while the estate still had unpaid creditors, the fiduciary will be personally liable unless if they knew, or should not have known, about a claim. In one case, a fiduciary was found personally liable to a hospital because a decedent’s death certificate stated that they died in a hospital and thus the court determined that the fiduciary should have known that there would be a hospital bill even if they had not actually seen or received one.
This concept is often applicable in cases where a decedent was receiving Medicaid benefits before their death. This means that it is of particular importance that fiduciaries of estates where the decedent received Medicaid benefits do not make distributions to distributees before they have satisfied any Medicaid lien– even if this means waiting longer than seven months after receiving Letters. In simple terms, if you are a fiduciary and you know the decedent received Medicaid benefits, consult with an elder law or trusts and estates attorney to determine whether it is safe to make distributions. It is in fact, very common for Medicaid to take longer than seven (7) months to file a lien because it takes time to determine the amount of Medicaid benefits that are subject to Medicaid recovery and to file a claim with the specified amount.
If you find yourself as an estate fiduciary, call the attorneys at the Law Offices of Roman Aminov, P.C. at 347-766-2685 to discuss your estate matter today.
This article is for educational purposes only - to provide you general information, not to provide specific legal advice from Roman Aminov. Use of this post does not create an attorney-client relationship and information contained herein should not be used as a substitute for competent legal advice from a licensed local estate attorney in NY or your state.
