Saturday, December 17, 2005

Advertising for Creditors

If you open up a daily newspaper in the Classifieds section, somewhere between the headings of “Motorcycles/ATVs” and “Strictly Personal” you may notice the heading: “Legals and Tenders.” If you read on you will probably see entries that say:

“Notice to Creditors and Others”

“Notice is hereby given to Creditors and others having claims against the estate of ________ that the particulars of their claims should be sent to the executor at _______on or before______, after which date the executor will distribute the estate among the parties entitled to it, having regard to the claims of which the executor then has notice”

Have you ever wondered why these notices are published?

An executor of a will (or administrator of an estate if there is no executor) has a duty to pay the deceased’s just debts out of the estate before distributing the estate to the beneficiaries. If the executor does not pay these debts before distributing the estate, the creditors can sue the executor, and a court could order the executor to personally pay the creditors.

Where an executor knows about the deceased’s debts, and chooses to distribute the estate to the beneficiaries without paying those debts, it will be fair to require the executor to personally pay the debts up to the value of the distributed assets. However, requiring the executor to personally pay the debts would be harsh if the executor made diligent inquires about the deceased’s affairs, but did not know about the debts when he or she distributed the estate.

British Columbia law provides an executor with a way of protecting him or herself against having to personally pay estate debts of which the he or she was not aware. Section 38 of the Trustee Act, RSBC 1996, c. 464, provides that an executor may publish a notice to creditors once in the British Columbia Gazette and four times in a newspaper published or circulating in the county in which the deceased resided. For this section to apply, the executor must publish the notice in the newspaper either twice per week for two consecutive weeks, or once per week for four consecutive weeks. The notice must give the creditors at least 21 days to send in their claims from the date of the last publication. If the executor complies with this section, he or she may then distribute the estate to the beneficiaries, without being required to personally pay those debts of which he or she did not have notice.

The executor is still required to pay any of the deceased’s debts that the executor knows about, regardless of whether the creditors respond to the notice. An executor should exercise reasonable diligence to determine the deceased’s assets and liabilities before distributing the estate.

If a creditor does not respond to the notice to creditors, the creditor may still seek payment of the deceased’s debt from the beneficiaries of the deceased’s estate. The notice to creditor does not relieve beneficiaries from liability. However, a beneficiary will not be required to pay any more to the creditor than the amount that the beneficiary received out of the estate.

1 comment:

J King said...

Thank you this is excellent information