THE AFFIDAVIT OF “REASONABLY DILIGENT INQUIRY” FOR CLAIMS AGAINST THE ESTATE

July 25, 2011 § 11 Comments

MCA § 91-7-145(1) requires the estate fiduciary to make “reasonably diligent inquiry” to identify persons who have claims against the estate, and to notify them by mail at their last known address that failure to probate a claim within the statutorily-prescribed time will bar their claims.

MCA § 91-7-145(2) provides that:

“The executor or administrator shall file with the clerk of the court an affidavit stating that such executor or administrator has made reasonably diligent efforts to identify persons having claims against the estate and has given notice by mail … to all persons so identified. Upon filing such affidavit, it shall be the duty of the executor or administrator to publish in some newspaper in the county a notice requiring all persons having claims against the estate to have same probated and registered by the cleerk of the court granting the letters, which notice shall state the time when the letters were granted and that a failure to probate and register within ninety (90) days after the first publication of such notice will bar the claim … ” [Emphasis added]

Most lawyers refer to this as the “Affidavit of Creditors.”

Clearly, then, the statute requires these measures, in this order:

  1. First, identify those having a claim against the estate;
  2. Send them notice conforming to the statute;
  3. File an affidavit with the clerk stating compliance with the statute;
  4. Publish notice to creditors.

Skip a step and you will have to start over. Go out of order and you will have to start over. Notice the language of the statute: it says that publication is undertaken “[u]pon filing such affidavit …” That clearly requires that you may not publish until after the affidavit has been filed. And, of course, the affidavit can not be filed until after you have made diligent inquiry and mailed your notices, if any.

In the case of In re Estate of Petrick, 635 So.2d 1389 (Miss. 1994), the untimely claim of a creditor was allowed because the administratrix published without notifying a creditor whom the court found was “reasonably ascertainable.” The court added that notice may be published only after the affidavit has been filed (at 1394).

In Houston v. Ladner, 911 So.2d 673 (Miss. App. 2005), the COA found the chancellor in error for finding a probated claim time-barred without first finding that the creditor was a reasonably ascertainable creditor. The creditor had not been sent notice by mail, and the COA pointed out that publication notice was not a substitute for mail notice; it was required in addition to mail notice.

Here are a couple of practice tips to help you comply with the statute:

  • Always question your fiduciary about bills of the decedent. It will be hard to argue that BOA Visa was not a “reasonably ascertainable” creditor when your fiduciary had been paying the bill herself for three months after the decedent died and before the estate was opened. It will be harder still to argue that the attending physician at the time of death was not “reasonably ascertainable.”
  • Why not include the required affidavit in your petition to open the estate, or in the fiduciary’s oath, whichever is the appropriate point for you? Maybe by eliminating one extra piece of paper you will be more likely to do it right.

Reminder: MCA § 93-13-38 makes the foregoing provisions applicable to guardianships and conservatorships, as well as estates.

The statutory requirements are technical and mandatory. Read the code and do what it says. Doing so can save you considerable grief down the road.

INSOLVENT ESTATES

January 13, 2011 § 5 Comments

When the debts and expenses of the estate exceed the value of its assets, the estate is said to be insolvent, and there is a procedure for adjudication of insolvency, satisfaction of creditors, and payment of administration expenses that is spelled out in MCA § 91-7-261 through -268.

The estate is insolvent when its debts and the expenses of administration exceed the value of the real property and the other property that is not exempt.  You can find out more about exempt property here.

Either the administrator or a creditor may petition the court to adjudicate its insolvency.

MCA § 91-7-261 sets out the procedure to determine insolvency.  The administrator is required to “take proper steps speedily to ascertain whether the estate be solvent or insolvent.”  If the administrator finds that the estate is insolvent, she files a “true account” itemizing all of the personal estate, assets of every description, the land of the deceased, and all of the deceased’s debts.  Notice is given to the devisees or heirs, and the matter is presented to the court for hearing.  If the court determines from the account that the estate is indeed insolvent, the chancellor will order that the assets be sold and that the expenses of ” … the last sickness, the funeral, and the administration, including the commissions …” are first paid out of the proceeds,” and that any remaining proceeds be divided among the creditors ” … in proportion to the sums due and owing them respectively …” 

The procedure for distribution of remaining proceeds among the creditors is provided in MCA § 91-7-269.  After the time to probate claims has elapsed, a notice is published for three consecutive weekss in a newspaper published in the county that the claims against the estate will be taken up by the court on a day and at a time certain, that any and all claims not required by law to be probated shall be filed with the clerk by a stated date, and that all creditors may attend.  A hearing is held at which the administrator may object to any claim, evidence is presented pro and con, and the court may either allow it in whole or in part, or reject it in whole or in part.  The administrator may file a verified application to be reimbursed for claims paid peior to the adjudication of insolvency, and the court shall treat them as if they had been properly probated.       

MCA § 91-7-271 provides that the allowed claims shall be paid pro rata, and any creditor not paid within ten day of the court’s order shall have execution against the executor or administrator and the sureties on his bond. 

Any suit pending against the executor or administrator at the time of insolvency does not abate, but may be prosecuted to final judgment, according to MCA § 91-7-273, but -274 bars suits from being filed after the estate is declared insolvent.  You should read -273 carefully for the effect of and payment of a judgment against the estate for suits that were pending when the insolvency is determined.

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