Estate Planning Newsletter – August 2015

ANOTHER CASE DEALING WITH CLAIMS FILED AGAINST AN ESTATE

     In my letter of March, 2015, I advised of some of the pitfalls associated with filing a claim against an estate and how the claim may be disallowed by the Court.  In the case of Estate of Lois Whitten, the Court reached an opposite result and allowed the claim.  However, the creditor incurred the cost of litigation in Chancery Court and in the Court of Appeals in order to have its claim of $7,000.00 allowed.  Although the claim was allowed, likely the legal fees through trial and appeal were more than the value of the claim.

       In the Whitten case, the decedent died on October 17, 2012.  Less than a month later, on November 12, 2012, the attorney for the administrators for the estate sent a letter to the creditor (The Drug Store) with a check for approximately $6,000.00, advising that if this amount did not satisfy the full payment due, to return the check.  The Drug Store returned the check within a few days.  However, The Drug Store did not file its claim until April 29, 2013, some six months after the date of death.

     The Tennessee statute dealing with claims provides that for creditors who receive notice, they must file their claim within four months of the date of publication of the notice.  The Court dealt with the issue of whether The Drug Store received an “actual copy” of the published Notice To Creditors.  The Trial Court ruled that the attorney’s letter provided sufficient notice to the creditor and therefore disallowed the claim.

     On appeal, the Court of Appeals reversed and focused on the statutory language in Section 30-2-306 of the Tennessee Code Annotated that requires the creditor receive “actual notice.”  The Court of Appeals wrote that actual notice requires the creditor to receive either the notice that was published in the newspaper or the same amount of information.  The Court wrote that the attorney’s November letter enclosing the check fell far short of the notice standards required by statute.  The letter did not include any information regarding the time or location of probate proceedings nor the time period within which claims must be filed.

     MY RECOMMENDATION:  Ultimately, the creditor prevailed, but probably at a cost that exceeded the value of its claim.  It is important that creditors take appropriate and timely action to file their claims timely.