Probate: How does it effect delinquent accounts?

by Candice J. Gundel, Esq.

Inevitably, the specter of probate will come along to possibly complicate an association’s efforts to recover monies owed on delinquent accounts. Probate is a court-supervised process for identifying and gathering the assets of a deceased person, paying debts, and distributing assets to his or her beneficiaries. Probate is necessary for distributing assets that are not properly disbursed in a will. In general, the deceased’s assets are used first to pay the cost of the probate proceeding, then are used to pay the outstanding debts, while the remainder is distributed to the beneficiaries.

A personal representative is one who oversees this process and has control over all assets of the estate. If there is no will or if the will does not nominate a personal representative, one is appointed by the probate court. This person is a fiduciary, meaning that he/she has a legal duty to pay, first the creditors of the estate, and second, the beneficiaries.

If a unit owner passes away before paying off their delinquent assessments, the amounts will ideally be recouped during the probate process. The personal representative’s attorney is required to give notice to any known creditors and to place a legal notice in the newspaper to inform any unknown creditors of the deceased’s passing. Assuming that a lien has been placed on the property, the personal representative’s attorney should be aware that the association is owed back assessments. The association will then file a notice with the court detailing its claim. It should be noted that the association has essentially the same rights to the delinquency as it did before the matter is handled by probate.

The personal representative should pay off the debt, as long as there are adequate assets in the deceased unit owner’s estate. It is important to be patient at this stage, because, as noted above, the personal representative is a fiduciary and can be held legally responsible for prematurely distributing funds from the estate. Therefore, they will be extremely careful regarding the timing.

What if there are not adequate funds in the estate to cover the delinquency? There is always the option of foreclosing on the property in order to recover the owed monies. This would force the beneficiaries to either pay off the debt or lose the property to the association. Although this seems like a drastic measure, sometimes it is necessary in order to recover what is owed. In the end, all that is required is a little vigilance in order to successfully navigate probate to the association’s advantage.