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Estate, Powers and Trusts, § 12-2.4: Effect of Judgment

When a person passes away his (or her) personal representative, also known as his executor or administrator, is charged with winding up his estate and ultimately distributing his assets to the beneficiaries the deceased named in his will. This happens during the process of probate or estate administration. In cases where the decedent failed to leave a valid will, the assets will go to his heirs according to the rules of intestate succession. Before the assets can be distributed, New York estate law requires that the estate administrator pay all valid debts of the estate such as the funeral expenses, taxes, fees associated with the administration of the estate, and any debts owed by the deceased that he failed to pay prior to death. The law has strict rules as to when claims against the estate must be filed and how they must be filed. Those claims that are not filed timely or properly may not get paid prior to the distribution of assets. This does not necessarily mean that the creditors who were not paid will not get paid at all. Unpaid creditors may to try to collect the money from those who received distributions from the estate. There are several rules associated with trying to recoup money from distributees. Under New York Estate, Powers and Trusts, § 12-2.4, Effect of judgment, if a creditor files a lawsuit against a distributee and wins, the judgment the court enters should not be against the distributee. Instead, a lien should be place against the property the distributee received from the estate. If you are concerned about a creditor who is attempting to collect a debt from the money received from a deceased loved one’s estate it is important that you consult an experienced New York estate administration lawyer who will explain to you the rules related to receiving a distribution from an estate as well as the rules related to the payment of estate debts.

Estate debt and liability of distributees

Although the law requires the executor or estate administrator to notify creditors of the debtor’s death, for a variety of reasons not all creditors file timely claims. As a result these creditors must try to collect the money from the beneficiaries and heirs who received distributions. While creditors can legally collect money that a deceased owed from beneficiaries who received distributions from the deceased’s estate the law does provide some protection to such beneficiaries. For example, if a creditor successfully sues a distributee, the court will place a lien on the assets received as a distribution from the deceased’s estate, instead of issuing a judgment against the beneficiary. As a result, the creditor will only be able to collect up to the amount of the distribution and will not be able to go after other assets owned by the distributee. If you are beneficiary and are concerned about a decedent’s creditor trying to collect from you, immediately contact a New York estate administrator lawyer to discuss your concerns.

Example

Wesley passed away leaving a modest estate and a significant amount of debt, including a $30,000 personal loan on which he had recently defaulted. A judgment was entered against him. He also left a will that named his sister, Gertrude, executor. In his will, Wesley left his entire estate to his nephew, Norm. After being formally appointed the executor by the Surrogate’s Court in New York, Gertrude published a notice about Wesley’s death. Several creditors came forward and filed claims against Wesley’s estate. Gertrude reviewed each claim to confirm their validity. She then used the liquid assets in Wesley’s estate to pay the claims. However, FinanceCo, the company to which Wesley owed the personal loan, did not file a claim. Gertrude distributed the small amount of assets that remained in the estate to Norm. FinanceCo came forward after all assets had been distributed and tried to collect from Gertrude and Norm. As an estate administration attorney in New York will explain, FinanceCo has no right to sue Gertrude as she gave proper notice to creditors. FinanceCo may be able to collect from Norm, but only from the assets that were distributed to him from Wesley’s estate.

Related Statutory Provisions
  1. Liability of distributes and testamentary beneficiaries: Estates, Powers and Trusts, § 12-1.1
  2. Order of liability; preferences: Estates, Powers and Trusts, § 12-1.2
  3. Extent of liability; judgment debtor’s right to indemnity and contribution: Estates, Powers and Trusts, § 12-1.3
  4. Action not impaired by failure of creditor or other person to precent claim to representative as prescribed by law: Estates, Powers and Trusts, § 12-2.1
Estate, Powers and Trusts, § 12-2.4- Effect of judgment

A judgment recovered in an action brought under this article is preferred, as a lien on any property of the decedent passing to a defendant against whom the judgment was recovered, to a judgment obtained against such defendant on his personal obligation.

Contact the Law Offices of Stephen Bilkis & Associates

New York estate rules regarding how assets must be distributed and debts paid from an estate are complicated. Those named as beneficiaries will only be entitled to assets that remain in the estate after your debts are paid. If beneficiaries are paid prior to all debts being paid, the creditors have the legal right to sue the beneficiaries for the outstanding debt. To make sure that your rights as a beneficiary or heir are protected, it is important that you are represented by someone with experience. The estate administration attorneys serving New York at the Law Offices of Stephen Bilkis & Associates have years of experience representing beneficiaries, heirs, executors, and administrators in disputes related estates and distributions of assets. Contact us at 1-800-NY-NY-LAW (1-800-696-9529) to schedule a free, no obligation consultation regarding your case. We represent clients in the following locations: Nassau County, Bronx, Brooklyn, Long Island, Manhattan, Queens, Staten Island, Suffolk County and Westchester County.

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