One of the unique aspects of estate administration in New Jersey is how “hands-off” it is compared to other states. An executor or administrator in another state has to get appointed by the court, provide accountings on a regular basis, and ask for the court’s permission before distributing assets. In New Jersey, the process of administering an estate (for many) simply involves getting appointed by the Surrogate. While the law requires executors or administrators to provide accountings within a year after being appointed, courts do not compel these representatives to file them unless demanded by a beneficiary or interested party, often for a perceived breach of fiduciary duty.
Even though NJ probate makes thing easier and more efficient, there are still issues dealing with creditors. After all, states with more judicial involvement will discharge a personal representative of his/her duties in administering the estate and bar creditors from going after the assets. This “cut-off” does not exist in New Jersey. Instead, New Jersey’s statutes give executors and administrators a mechanism to deal with an estate’s creditors.
A creditor must present a claim to the estate within nine months of the decedent’s death, and the executor or administrator has three months to accept or reject the claim. N.J.S.A. §3B:22-4,7. If the claim is rejected, the creditor can go to court to prove its claim. Oftentimes, a creditor will file a proof of claim with the Surrogate to create a public record. If the personal representative distributes assets before the nine months and is presented with a claim and cannot pay it, the personal representative can be held personally responsible for the claim. It’s why I always recommend not closing out an estate account and doing final distributions until nine months after the date of death.
If a claim isn’t presented within nine months of the decedent’s death, the personal representative isn’t held personally liable. N.J.S.A. §3B:22-10. Now that doesn’t mean the creditor cannot file the claim against the estate, so long as there are assets of the estate. If the claim is rejected, the creditor has one month from the date of rejection to file an action in court to prove the claim. N.J.S.A. §3B:22-13. But even if the creditor can prove his or her claim, he or she may not get the claim paid unless the court makes a finding of good cause being shown to direct the estate to pay the claim. If the assets have already been distributed, the law also allows the creditor to go after beneficiaries of the estate up to the amount they received from it. N.J.S.A. §3B:22-16.
While creditors are not completely barred after nine months to demand payment on a claim, courts must find that the estate and beneficiaries should be required to pay the claim. It doesn’t provide the complete finality executors and administrators are looking for, but it does create some peace of mind for a personal representative knowing when it will be easier for creditors to make a claim against an estate.
To discuss your NJ estate administration and probate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.
Written by Stephen W. Kornas, Esq. of Hanlon Niemann & Wright