Disclaimer: This article provides general information and is not legal advice. Consult a qualified attorney for guidance on your specific situation.
Detailed Answer
Under Michigan law, an executor (known as a personal representative) has a fiduciary duty to manage the decedent’s assets carefully. Before settling any creditor claim, the personal representative must confirm that the estate holds sufficient funds to cover that claim as well as other administrative expenses. Failing to do so may expose the personal representative to personal liability for breach of duty.
- Inventory and Appraisal: Within 91 days of appointment, the personal representative must inventory all estate assets and appraise their value. See MCL 700.3612. This inventory establishes the pool of funds available to pay claims.
- Notice to Creditors: Publish notice in a local newspaper and mail notice to known creditors. Creditors then have four months to file a claim. See MCL 700.3802.
- Priority of Payments: Michigan’s Estates and Protected Individuals Code sets a payment order—funeral expenses and taxes first, then administration costs, secured claims, and unsecured claims. Confirming funds prevents depletion of higher-priority reserves. See MCL 700.3441.
- Review and Approval: Verify the validity and amount of each claim. Ensure the estate has liquid assets or has converted property to cash. If funds are insufficient, petition the court for authority to sell assets or for partial payment.
- Final Accounting: When filing the final account, report all receipts and disbursements, including payments to creditors. Courts review these accounts to ensure compliance with statutory duties. See MCL 700.3710.
By confirming available estate funds before paying a creditor, a personal representative upholds fiduciary duties, ensures fair treatment of all claims, and reduces the risk of personal liability.
Helpful Hints
- Maintain detailed records of all estate assets and transactions.
- Engage a probate attorney early to navigate complex claims and liquidity issues.
- Track the four-month creditor claim deadline to avoid late filings.
- Reserve funds for taxes, administration expenses, and high-priority claims before paying unsecured creditors.
- Consider professional appraisers for unique or hard-to-value assets.