Case History: Creditors’ Timeliness to Collect Debt After Death
| September 6, 2018
When a debtor dies, Arizona probate law has always placed the burden on the creditor to act timely to preserve the claim. A recent case demonstrates how strict that burden can be. In re Estate of Evitt, 2018 WL 4017786 (August 23, 2018).
Post-Death vs Pre-Death Creditors
Judith and Charles divorced in Arizona. As part of the divorce settlement, Charles agreed to pay Judith $150,000 at his death. The settlement identified how Charles could satisfy the debt, but did not require him to take any action while he was alive.
Charles moved to Wyoming, and died there 26 years later. His daughters opened a probate and gave notice to known creditors. Unaware of the debt to Judith, they did not notify her. After satisfying creditors, they closed the probate.
Judith eventually learned of her ex-husband’s death, opened a probate in Arizona, and sought payment of her creditor’s claim. The daughters appeared, challenged her claim as untimely, and won in probate court. Judith appealed.
The Arizona Court of Appeals affirmed the decision. The question it faced was: Was Judith a pre-death or post-death creditor? Judith argued post-death: Charles didn’t owe her anything until he died, so she had to be a post-death creditor.
The court disagreed. In interpreting the statute as to whether the claim “arose before the death of the decedent,” the court determined it had. “Arose,” under its ordinary meaning, meant “to come into being” or “originate.” Judith’s claim came into being before Charles’s death. The fact that Charles’s obligation didn’t arise until his death didn’t matter; what mattered was when it originated.
As a creditor for a claim that arose before death, Judith had to present her claim before the creditor’s period ran (in Wyoming, three months from the date of first publication). Having failed to do so, Judith’s claim was barred.
Takeaways From Estate of Evitt
Practice pointers: The case should be a cautionary tale for family law practitioners, even more than for probate lawyers. When devising the settlement, lock up future obligations – for example, by requiring the paying spouse to maintain, and to provide annual proof of, life insurance to satisfy the claim. Otherwise, the creditor-spouse will need to keep close enough tabs on the ex-spouse to know the date and place of death.
For probate lawyers, the case serves as another reminder that the creditor claim statutes are absolute and allow little wiggle room for equitable relief.
James A. Fassold is a shareholder with Tiffany & Bosco and specializes in probate and trust litigation, estate administration, elder law, and appeals.Back to News & Events