Q: How do you file a claim against a trust? Do you go to the clerk's office like you would for an estate?
A: The process for collecting on a debt of a decedent from his estate and his trust can be very different.
Filing a claim for a debt in an estate is a formal process. The Indiana code and local rules provide a formal procedure for filing a claim. You start the process by simply filing a claim in the clerk's office. The clerk will provide a simple claim form that can be completed, filed and mailed to the proper parties.
However, one major caveat is that the claim has to be filed in a timely manner. Claims have to be filed within three months of the first publication of notice of the opening of the estate.
There is also a statute that provides that known creditors have to receive actual notice, but for everyone else, publication is the trigger. Now how many of you actually read legal notices?
I'm guessing two people raised their hands and both of them are attorneys. I'm looking at you Jack and Cal.
In addition to the three month time limitation, there is another really important deadline to be aware of. In Indiana, claims are barred if they are not filed within nine months of the date of death regardless of publication. This is true for all claims except for claims from certain government bodies and agencies.
Think about that for a minute. If an estate is opened and publication is first made eight months following death, the actual deadline to file a claim is one month, even though the publication notice deadline would suggest you have three months. The nine month claim bar slams the window on the publication deadline. Publication can shorten the time in which to file a claim but it can't extend it.
Trusts don't have that formal procedure for paying creditors. Most revocable living trusts have a provision that provides something to the effect that the trustee can pay valid claims of the estate if the estate can't pay them itself.
However, what is a valid claim may not be all that clear. Some trustees have argued that a valid claim is a claim that has been timely filed with the clerk and determined to be valid by the personal representative or the judge. The fact that an estate isn't opened isn't determinative.
Also, remember that notice isn't published when a trust is administered. That eliminates the shortened claim window provided to estates, but the nine month bar is still there. Some attorneys will even open an estate just to publish notice to shorten the claim window.
It has been my experience that most trustees are cooperative when it comes to paying claims. As long as they receive notice within the nine month deadline and the claim appears to be valid and proper, they pay the claim.
However, if a trustee won't budge on the claim, you may have to open a creditor's estate to file a claim and ask the personal representative to determine the claim is valid, or even seek recovery of non-probate assets, like the trust's assets, to pay creditors.
The moral of the story is if you are owed money by a decedent, take the appropriate, timely action. File a claim with the estate timely in the clerks' office. If you're dealing with a trust contact the trustee promptly. Don't let the trustee drag the discussions out too long because after the nine month window is closed, the discussions will end quickly.
Christopher W. Yugo is an attorney in Crown Point. Chris’ Estate Planning Article appears online every Sunday at www.nwi.com. Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chrisyugolaw@gmail.com. Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.
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