Creditors Claim Procedure for Trust Administrations

May 25, 2011

I was standing in line at the market the other day and I noticed a storyline on the first page of a weekly fan magazine that stated "Elizabeth Taylor's Estate Begins Probate." I was puzzled, and always am, when people of means, who are presumably surrounded by business people and lawyers, don't have an estate plan in effect which would, at the very least, avoid probate.

So, I did a little research. It turns out that the estate is not being probated. Ms. Taylor had a revocable trust at the time of her death. However, the attorneys for the trust opted for a court proceeding which is commonly referred to as a Creditor's Claim process for trust administrations.

The probate court has jurisdiction over trust matters. The Creditors Claim process brought in a trust administration is voluntarily filed in the probate court. The Creditors Claim process in a probate is mandatory.

After receiving notice, if a creditor does not file a timely claim against the trust (within 4 months of published notice or 60 days from date notice is mailed or from date of personal service, whichever is later) the creditor's claim would be barred.

There are numerous benefits for opting to initiating the Creditors Claim process in court for a trust administration. The procedure limits the 1 year limitations period in which creditors would otherwise have to file claims, it will force noticed creditors to pursue their claims, or not, allowing the administration of the trust to move ahead without fear of a lurking outstanding claim, if a claim is questionable it can be addressed in a limited period and distributees don't need to worry about a properly noticed creditor pursuing the claim against the beneficiary's inheritance from the decedent's trust .