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Context and a short hypothetical

Hypothetical: A decedent died owning a house with a contractor’s unpaid invoice and with a homeowner’s‑insurance check issued to the estate after a damage claim. The contractor asserts a third‑party claim. The personal representative must record the claim, any payment from the insurer, and any payment to the contractor in the estate account and in filings with the court.

Step‑by‑step: How to ensure third‑party claims and payments are accurately recorded in New Mexico probate

1. Identify and document the claim source.

   Document who is asserting the claim (contractor, vendor, insurer, medical provider), the basis for the claim (invoice, contract, subrogation), and the supporting documents (signed contract, unpaid invoice, correspondence). Retain originals and keep digital copies.

2. Follow New Mexico notice and claims procedures.

   The personal representative must comply with New Mexico probate procedure for giving notice to creditors and for receiving and adjudicating claims. See NMSA 1978, Chapter 45 (New Mexico Probate Code) for the statutory framework governing creditor claims and allowance. For practical guidance and local court forms, review the New Mexico courts’ probate resources: https://nmcourts.gov and the New Mexico Legislature site for the statute chapter: https://www.nmlegis.gov.

3. Log every incoming payment and its source immediately.

   If a third party (for example, an insurer) pays money that belongs to the estate, open a dedicated estate bank account, endorse payments into that account, and record the deposit with date, payer, amount, and check/reference number. Do not mix estate funds with personal funds.

4. Record claims and payments in an estate ledger.

   Keep a clear ledger that shows: (a) the claim as a liability (original amount claimed), (b) what portion of the claim is allowed or disputed, and (c) every payment applied to that claim. For each entry include date, payee/payer, amount, method (check/ACH), and a cross‑reference to supporting documents (invoice, check image, receipt).

5. Attach supporting evidence when filing accountings or motions.

   When you file interim or final accountings, include or have available copies of the invoices, correspondence showing the claim, the insurer’s explanation of benefits, copies of deposit slips, canceled checks, and bank statements that show the flow of funds. Courts expect the accounting to reconcile to bank records and receipts.

6. Seek court approval when required.

   If you plan to pay a disputed claim, pay a large creditor, or distribute estate funds that affect interested persons’ shares, request court approval by motion or include the payment in the formal accounting so the court can allow or disallow claims. Have the claimant file a proof of claim if the court requires it and be prepared to schedule a hearing if someone objects.

7. Show how third‑party payments reduce the estate’s liabilities.

   When an insurer pays money for a loss, record the payment as estate income (or a direct recovery) and then record the application of those funds (for example, repair payments to the contractor). If a third party pays the creditor directly, document whether the payment satisfied the debt or created a subrogation claim in the estate.

8. Resolve setoffs and subrogation issues in writing.

   If a third party (like an insurer) reimburses a creditor or asserts subrogation rights, get written agreements that describe who gets what portion of the proceeds. Put that agreement in the estate file and attach it to accounting entries and the court filing.

9. Keep interested persons informed.

   Provide notice and copies of accountings to beneficiaries and other interested persons as required by the court rules. Transparent communication reduces objections and speeds approval.

10. Reconcile before closing the estate.

    Before filing a final accounting and asking the court to close the estate, reconcile every claim and payment: ledger balances should match bank statements, supported by invoices, receipts, and court orders allowing payments. Include an explanation for any outstanding contested claims.

What documents to file with the court

• Proofs of claim or creditor statements (if applicable).
• Court motions to allow or disallow claims, with supporting exhibits (invoices, contracts, correspondence).
• Copies of insurance checks, deposit slips, and canceled checks or electronic payment confirmations showing how funds were received and disbursed.
• Interim or final accountings that include a ledger showing receipts, disbursements, distributions, and remaining assets.
• Any signed settlement agreements or releases resolving the third‑party claim.

Common pitfalls to avoid

1. Mixing estate and personal funds.
2. Failing to get receipts or releases when paying creditors.
3. Not filing accountings or waiting to document payments until after distribution.
4. Assuming a payment to a creditor by a third party eliminates the need to document the transaction for the estate accounting.

Helpful Hints

• Open a dedicated estate bank account immediately and use it for all estate receipts and disbursements.
• Keep a chronological file with a simple index (date, document type, parties) for quick retrieval during accounting.
• Scan and back up all invoices, checks, and correspondence to a secure cloud folder labeled for the estate.
• When in doubt, request a short court approval or order allowing a significant payment — it protects the personal representative from later surcharge claims.
• Use clear ledger descriptions: e.g., “Insurance check #1234 (ABC Ins.) — deposit 6/1/20XX,” “Payment to Contractor X — invoice #567 — 6/10/20XX (court‑allowed).”
• If a third party paid a creditor directly, obtain a written release from the creditor confirming satisfaction of the debt and whether they assign any subrogation rights to the estate.
• Review the New Mexico Probate Code (Chapter 45) and New Mexico court local rules for specific notice timelines and accounting requirements: https://www.nmlegis.gov and https://nmcourts.gov.
• Consider getting professional help for complex claims or large estates. An attorney or accountant experienced with New Mexico probate filings can reduce the risk of errors and objections.