Disclaimer: This article is for informational purposes and does not constitute legal advice. Always consult a qualified attorney for advice on your specific situation.
Detailed Answer
Under Arkansas probate law, an executor must confirm that the estate holds sufficient funds before settling a creditor’s claim. This practice protects you against personal liability and ensures you fulfill your fiduciary duties to beneficiaries.
Why Verify Funds?
Arkansas Code requires executors to gather and manage all estate assets, pay valid debts, and distribute any remaining property to heirs in accordance with Ark. Code Ann. § 28-41-106. If you pay a claim without confirming available assets, you could deplete funds needed for funeral expenses, taxes, or higher-priority debts.
Steps to Confirm Available Funds
- Inventory Assets: Compile bank statements, investment accounts, real property appraisals, and personal property values.
- Account for Pending Income: Include any unpaid wages, rents, or insurance proceeds due the estate.
- Review Filed Claims: Notice to creditors must be published or mailed within three months of appointment under Ark. Code Ann. § 28-41-106. Only claims filed timely are enforceable.
- Calculate Liabilities: List funeral costs, administrative expenses, taxes, secured debts, and permitted priority claims under Ark. Code Ann. § 28-42-101.
- Determine Surplus: Subtract total liabilities from total assets to identify available funds for each creditor.
Consequences of Insufficient Funds
If the estate lacks funds to pay all valid claims, you must:
- Prioritize secured creditors and funeral expenses.
- Proportionally reduce unsecured claims.
- File a petition with the probate court for instructions on insolvency.
Failing to confirm funds or to follow proper payment order can lead to personal liability for unpaid debts or removal as executor.
Helpful Hints
- Use accounting software or a probate ledger to track estate transactions.
- Obtain written releases from creditors after payment to avoid future disputes.
- Keep beneficiaries informed of the estate’s financial status and proposed distributions.
- Consult the probate court clerk for local procedural requirements.
- Retain copies of all notices sent to creditors and proof of publication.