It’s important to first know what the assets of the estate are, and what claims are being made against those assets. Is the estate solvent? If not, Minnesota law sets out a priority list for paying creditors. The creditors at the bottom of the priority list may not receive anything.
If, however, a family member has already advanced money to pay the bill of a creditor near the bottom of the priority list, then the family member will not be reimbursed if the creditor would not have been paid under Minnesota law regarding insolvent estates.
Therefore, the best scenario is to delay payments to creditors until meeting with a lawyer to assess whether the estate is insolvent or not. If it is insolvent, a special type of probate will be needed in which the court ultimately directs which bills are to be paid and which ones won’t be paid according to state law. Having the court involved also has the advantage of mitigating creditor pressure on the personal representative.
A note of caution: Survivors sometimes mistakenly think an estate is solvent because the upcoming sale of the deceased’s house will net sufficient money to pay all creditor claims. However, Minnesota law exempts certain assets, such as the home, from most creditor claims if the house passes to a surviving spouse, children, or grandchildren. It doesn’t matter if the children are grown-ups and living elsewhere. (Claims related to the homestead that are not exempt include any remaining mortgage, and any claims for state hospital care and medical assistance.) Consequently, the estate may be officially insolvent even though it appeared to be solvent due to the home value.
The most prudent step when someone dies may be to contact a lawyer to help sort out the myriad rules related to the transfer of assets.
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Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney licensed to practice law in the state where you live. Wittenburg Law does not expressly or implicitly warrant the accuracy or reliability of any of the Blog’s contents. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.
Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305 952-649-9771 firstname.lastname@example.org www.bwittenburglaw.com