As a trustee in California, navigating the complexities of administering a trust often involves understanding various legal procedures, including the elective creditor's claims procedure. This process, outlined in the Probate Code, provides a framework for handling creditor claims against a trust property.
Elective Creditor's Claims Procedure
The elective creditor's claims procedure offers trustees a mechanism to address creditor claims against a trust property. While trustees are not obligated to initiate this procedure, understanding its intricacies can be crucial in managing potential liabilities.
Filing Claims & Giving Notice
To initiate the claims procedure, trustees must file a Notice to Creditors with the County Clerk. This notice is akin to a court filing and incurs associated fees. Additionally, trustees are required to publish notice to creditors in a local newspaper and provide actual notice to known creditors. These steps are essential to inform creditors of their opportunity to file claims against the trust.
Time for Filing Claims
Creditors generally have four months from the first publication of notice to file a claim. However, if a creditor receives actual notice, they must file within the later of the four-month period or 60 days after receiving notice. Late claims may be permitted under specific circumstances outlined in the Probate Code.
Rejected Claims
Trustees have the discretion to allow or reject claims, but they cannot approve claims barred by the statute of limitations. Rejected claimants have 90 days to bring an action against the trustee on the claim, following which the trustee must file a notice of rejection with the court clerk.
Petition for Approval & Settlement of Claims
If the trustee elects to use the claims procedure, they must file a verified petition with the court for allowance, settlement, or compromise of claims. Notice of the hearing on the petition must be provided to all interested parties, and responses must be filed timely to participate in the proceeding.
Protection for Trustees
It is important to note that trustees are not obligated to initiate the claims procedure, and they cannot be held liable for failure to do so. However, trustees must act in good faith and provide notice to creditors when required. Failure to provide notice may result in liability if done in bad faith and if the creditor can demonstrate lack of actual knowledge within a specified timeframe.
Get Experienced Counsel
Navigating the elective creditor's claims procedure requires careful consideration of legal requirements and potential implications for trustees and beneficiaries. While trustees have discretion in initiating this procedure, understanding the nuances can help mitigate risks and ensure compliance with legal obligations.
At OC Trial Group, we can provide guidance to trustees in navigating complex legal procedures, including handling creditor claims. Contact us today to learn more about your responsibilities as a trustee in California.
Call (949) 270-3424.
