How Do I Bring a Claim Against a Trust?
HOW DO CREDITORS BRING CLAIMS AGAINST A TRUST AFTER THE SETTLOR DIES?
When trust or administration proceedings begin, the Trustee must give notice to all creditors of the trust (or estate) by complying with applicable laws relating to creditors and notice. Where the trust is administered without court supervision, this notice generally is given in two ways:
- by mail, to known and identifiable creditors; and
- by publishing a notice in a newspaper of general circulation in appropriate areas (usually, the area where the decedent lived and/or owned property, although the rules may vary by jurisdiction)
The trustee also may file a proposed Notice to Creditors in the probate court with jurisdiction over the trust or estate, in addition to giving the two types of notices referenced above.
CREDITORS MUST FILE CLAIMS PROPERLY, AND IN A TIMELY MANNER
Assuming the trustee complies with all statutory requirements and gives proper, timely notice to the decedent’s creditors, the creditors must file their claims within the proper statutory period (generally, the later of (a) sixty (60) days after actual notice was mailed or delivered to the relevant creditor, or (b) four months after the first date on which the notice to creditors was published in the newspaper).
However, if notice is not given properly, this period may be extended or late claims may be allowed to proceed–but only until the one-year statute of limitations (which begins on the date of the decedent’s death) has run.
Claims must be made in writing. While there is no official California form for creditors to use when making a claim against a trust that is being administered outside of probate, there is a form (DE-172) for creditors to use when making claims against a decedent’s estate (in probate). Some courts allow creditors to use this form when making claims against a trust that is being administered with court supervision. However, providing written notice and proof of the existence, amount, and nature of the relevant claim, in form and substance adequate for the trustee to evaluate, understand, and make a reasonable decision whether or not to allow the claim, is usually sufficient.
When a creditor files a claim, the filing tolls the statute of limitations until the trustee either allows or rejects the claim; if the claim is allowed, the statute is tolled again until the claim is paid. If the claim is rejected, the statute of limitations begins to run again immediately.
HOW DOES A TRUSTEE APPROVE A CLAIM?
When a claim is filed, the trustee reviews the claim and decides whether or not to accept it (i.e., decide that the claim should be paid). The trustee must give the creditor official notice of the decision about the claim promptly after the decision is made. As with the claims themselves, there is no official form a trustee must use, but notice of the decision should be given in writing. If a court is supervising the trust administration, the court usually reviews (and approves or rejects) the trustee’s decisions on creditors’ claims.
WHAT HAPPENS IF A CLAIM IS REJECTED?
If the trustee rejects a claim, the claim is barred, which means the trust will not pay the claim. This means the creditor is not entitled to payment. However, if a claim is rejected, the creditor can file a lawsuit (or, in appropriate cases, a request for arbitration or other alternative dispute resolution), but any such actions must be commenced within 90 days after:
- the date the rejection notice is served on the creditor (if the claim was due and payable at the time the notice is given), or
- the date the claim becomes due (if it was not due when the notice was given)
If you have a claim against a trust or estate, and believe your claim was wrongfully rejected by the trustee, consult an experienced lawyer immediately for an evaluation of your legal rights and potential claims. If the statutory period for challenges expires, you may lose your right to collect.
If you are the trustee of a trust, and are not sure how to handle creditors’ claims, consult an experienced attorney immediately for assistance. Many probate and estates lawyers provide assistance with trust and estate administration, and can counsel you on how to proceed.
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Disclaimer: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE AUTHOR OR ROSS LAW AND ANY PERSON. Your legal rights and experiences may vary. Never use an online article (including this one) to evaluate your legal rights or claims. Consult an experienced attorney promptly to obtain a personalized evaluation of your claims, potential damages, and the various legal rights and options available to you.
You may lose or compromise your rights if you delay in consulting legal counsel. Most legal claims (and defenses), as well as legal and court procedures, are complicated and fact-dependent. If you believe you have a claim against someone who injured you, a lawyer who represented you in a previous lawsuit, or any other legal claim, consult an experienced lawyer immediately for an evaluation of your individual rights and claims.
