Advertising for creditors is an important step to protect an estate trustee from liability for the debts of the deceased. Publishing a notice to creditors is appropriate for most estates. If a client does not wish to advertise, it is advisable to get a signed direction letter confirming this.
When is it necessary to advertise for creditors?
An estate trustee who does not advertise for creditors can be held personally liable for the debts of the deceased. There is no cap on this potential liability. If the deceased had an outstanding five-figure debt that an executor was unaware of, the executor could be on the hook for the full amount.
Publishing a notice to creditors is a sensible precaution to take for the vast majority of estates. Since NoticeConnect makes it easy and inexpensive to advertise for creditors (and the cost of posting is paid by the estate), there's no reason to skip this step.
My client says the deceased had no debts, do I still need to advertise for creditors?
If there is absolutely no chance that a deceased individual had an outstanding debt (e.g. if someone has been living in an institution for a decade with no control over their own finance), then advertising for creditors may not be necessary.
But trustees should be cautioned against making assumptions.
When someone dies, there's no definitive list of who they owed money to. It's easy to be caught off guard by unpaid utility bill, a personal loan, or a credit card debt. Just because you don't know about a debt doesn't mean that the debt doesn't exist.
Best practices: Get a direction letter
If your client is confident that the deceased had no outstanding debts and does not want to advertise for creditors, a best practice is to confirm this in writing via a signed direction letter.
The letter should confirm that you've explained the risks and potential liability to the client, and that they have decided not to publish a notice to creditors.
This letter is an effective way to ensure that the estate trustee has thought about the potential for liability and made an informed choice. It's also an effect way for a law firm to protect themselves from an insurance claim down the road if an outstanding debt does emerge after the trustee distributed the assets.