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CIiCU 74 is up with our full cast to start off the fall. This month, Faith, Hal, Guy, Katherine & Rob talk about: the changes at NCUA, the reality of low-income designations, unanswered questions concerning APR and new CFPB disclosures, CUSOs and loan participations. Listen to it here.
We also want to give a shout to Tammy Holtzmeier and her gang at CUhomepage for launching today. Check them out! I am betting that it quickly becomes one of the best go to sites on the web for all things credit union.
By Stuart A. Best, Partner
Probate Collections require special care over and above following the law to make sure that proper respect is given to the grieving family. Although probate collections is obtaining payment from a deceased estate, there are many statutory protections for the family to assure that funds set aside for the family are protected from creditors, yet allowing the lender to collect, either funds which are due to them from the deceased borrower’s estate, or to obtain their collateral. With the average age of Americans advancing, and the baby boomers moving closer to their “Golden” age, probate collections is a fast growing tool for lenders which cannot be overlooked. If performed compassionately and within the bounds of the processes and procedures set up in most states, however, probate collections can be a sound source for the collection of receivables, while protecting the reputation and integrity of the Credit Union.
In most states there are “widows” elections and or “family allowances” which are statutory protections that provide the family of the deceased a high priority claim as to the deceased’s funds. These claims are calculated after cost of administration of the estate and taxes, and yet before any claims of creditors or heirs/devisees of the estate. These elections and or allowances are calculated on the value of the entire estate, which many times does not include: excluded assets such as real property which was deeded jointly, or “by the entireties” with a spouse, life insurance proceeds, 401(k) benefits for which a beneficiary was listed, to name a few. These assets pass outside of probate and are not subject to the claims of creditors.
Once the estate has accumulated all of the assets of the deceased, which are properly assets of the estate, creditors are permitted to file a claim with the probate court. The filing of a claim does not guarantee payment, nor does it eliminate the need for a lawsuit in the event the personal representative objects to the claim. If an objection is made to any claim, a lawsuit may still be needed, thereby allowing the probate or other proper court to determine the validity of the claim. Once the claim is allowed by either the personal representative or the court enters judgment, it can be paid in the proper order.
In the event the Credit Union has collateral which is retained by the estate, the probate court has control over that collateral to ensure proper probating and distribution of the estate. In many states, an execution cannot be effected against an estate asset, unless and until the probate court permits such. Self-help or repossession may or may not be permissible without probate court approval. Real estate foreclosures in most non-judicial states can proceed following notice to the estate, or the heirs of the deceased, while a judicial foreclosure may require the opening of an estate in the event that one has not yet been opened.
In most states, in the event there are assets of the deceased (typically real property) and the family has not opened a probate estate, one can be commenced by a creditor. A creditor can file for probate to ensure proper administration of the estate and distribution of the assets of the deceased. A creditor opening an estate would request the court to appoint a personal representative. If the family is unable or unwilling to act, the court will appoint a public administrator, whose job is to probate any estate that the court assigns. The fees and costs of administration are paid out of the estate assets or by the county, unless the public administrator determines that the opening of the estate was futile (there were no assets to distribute), wherein the creditor may be assessed those costs.
Typically, once assets of the estate are located, the distribution of those assets are also controlled first by statute and then by any will of the deceased. The order of payment out of the estate is usually: federal taxes, cost of administration of the estate, state taxes, widows allowance, and family allowance, payment of allowed claims, and only then, the heirs or devisees of the deceased according to the Will. If there is no Will, then payment is controlled by a statutorily defined process.
Probate collections can be very successful, if properly handled. Filing a claim in a timely manner is essential to protect the rights of the lender. In many states, notice of the death of a borrower must be provided to all “known creditors.” The personal representative is required to mail a notice to all of the deceased’s lenders and anyone to whom they owed funds which can be readily determined. The personal representative is also required to publish notice of the right to file claims against a deceased estate in an authorized legal publication. Once the notice is received or published, there is a defined window of time in which to file a claim with either the personal representative or the probate court. If this window is missed, most claims are “forever barred.” Once the claim is filed, the personal representative can deny the claim and an action must be filed in either the probate or other court to prove the debt.
The process is very protective of the family of the deceased, yet allows for the orderly and proper distribution of assets. Minimal contact, or no contact, is necessary with the family and their rights are well protected by the statutes and probate court. A major key to the process is that any contact with the family or their representatives is done with compassion, respect and honor.
If you have any questions about probate collections, visit our website or contact Mr. Stuart A. Best, Esq. Stuart is a partner in the Detroit office of Weltman, Weinberg & Reis Co., LPA practicing in Litigation & Defense. He can be reached at 248.786.3124 and firstname.lastname@example.org.
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Suddenly, it’s not light out when I wake up in the morning and the evenings aren’t sunny after 9 anymore. Labor day has been and gone leaving us with kids back at school, change in the air and the desire to work. Well, maybe that last one is wishful thinking, but it is at least the desire to have the desire to work.
Wistful writing on TCUB or a fervent desire to post content when we have none? Perhaps both. The secret around here is that we get lots of content from WWR lawyers all at once and then not so much. That’s fine when yours humbly has time to write but no so fine when he doesn’t. Free lancers help, but ultimately, when things are slow, someone has to start the keyboard going.
In other news, while we did not do a Current Issues in Credit Unions show in late August we will be back this month. And then in October, we are again doing a live show at the NAFCU Compliance Conference. We had so much fun in Florida last year, we are excited to do it again this year in Seattle.
Since I seem to be headed down the route of self-promotion, why not go all in? Today, I am doing a beginning BSA seminar for the Michigan League. The volunteer version will be on September 27th and the management version will be on October 9. Need extensive BSA training? Check it out.