Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a qualified attorney for advice about your specific situation.
Detailed Answer
Under New Mexico law, a personal representative (often called an executor) has a fiduciary duty to gather estate assets, review creditor claims, and pay valid debts in an orderly manner. Confirming available estate funds before settling a creditor claim is essential to fulfill these duties and avoid personal liability.
1. Inventory and Appraisal
The personal representative must file an inventory and appraisal of all estate assets within three months after appointment. This step shows the total value and liquidity of assets, including cash, bank accounts, investments, and real property. See NMSA 1978, §45-3-709 (Inventory and Appraisement).
2. Notice to Creditors and Claim Allowance
New Mexico law requires publication and direct notice to known creditors. Creditors then submit claims, which the personal representative must either allow or reject. You cannot pay any claim until you complete this review process. See NMSA 1978, §45-3-807 (Allowance or Disallowance of Claims).
3. Assessing Liquidity Before Payment
Once claims are allowed, the executor must determine if the estate holds enough liquid assets to honor payments. If the estate lacks sufficient cash or readily marketable assets, the personal representative may need to:
- Liquidate non-cash assets (e.g., sell investments or real estate).
- Delay payment until funds become available.
- Negotiate with creditors to extend deadlines or accept partial payment.
4. Payment of Allowed Claims
Allowed claims must be paid from estate funds in the statutory priority order. Failure to confirm available funds before issuing payment can expose the personal representative to personal liability if the estate later proves insolvent. See NMSA 1978, §45-3-903 (Payment of Claims and Expenses).
By carefully verifying account balances, reconciling statements, and reviewing brokerage or retirement account holdings, the executor ensures payments are proper and timely without jeopardizing other estate obligations.
Helpful Hints
- Obtain up-to-date bank and brokerage statements before reviewing claims.
- Keep a written record of all deposits, disbursements, and liquidations.
- Prioritize debts according to New Mexico’s statutory order (e.g., administrative expenses first).
- Consider opening a dedicated estate checking account to track payments.
- Consult a probate attorney if you face complex asset valuation or liquidity issues.