Non-Exempt Property and Creditors in Probate

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July 1, 2024

One of the most critical and exhausting aspects of dealing with any probate matter is the handling of creditors' claims. When someone passes away with debts owed, including any outstanding medical bills, credit card accounts, and even everyday expenses like cell phone bills and cable bills, those companies may file a claim against the estate of the deceased in order to recoup their expenses. These claims often come as a surprise for Personal Representatives as they are rarely familiar with every aspect of their loved one's finances at the beginning of the probate process. Sometimes even the decedents themselves are unaware of these debts at the time of their passing and Personal Representatives get blindsided by years-old debt from a credit card their loved one had long since forgotten about. The good news is Personal Representatives have a lot of options with regard to the management of the estate's debts.

Once appointed, one of the powers a Personal Representative has is the power to negotiate with creditors. Most creditor's claims are filed via a collection agency and not by the original lender, so the debt has already been sold off once and the collection company is looking to settle for an amount that will satisfy their investment. Usually, this means that they will be willing to accept a lower amount than the initial claim filed against the estate. The most common exception is medical debt, particularly any medical debt that was accrued in the last 60 days of a person's life, since by statute that debt takes priority as a Class 4 claim, while credit card debt and unpaid utility bills are Class 8 claims; the lowest class.

In addition to negotiating directly with creditors, Florida law allows for certain assets of an estate to be ruled as exempt from claims of creditors. This means that the estate cannot be compelled to sell off these assets in order to settle debts and guarantees that these assets will be transferred into the possession of the estate's rightful heirs directly.

Florida Statute 732.402 defines what exactly qualifies for this exemption and the rules often come as a surprise to our clients: two cars, as long as they have a gross weight of less than 15,000 pounds each and were regularly used by the decedent or their immediate family, can be exempted from claims of creditor. The weight limit ensures that this exemption cannot be used for heavy equipment such as a bulldozer, bus, or food truck, i.e. equipment that the decedent owned for business purposes, but nearly all standard cars and trucks fit this description. However, this exemption only applies to the immediate family of the decedent; their spouse and/or children. This law is in place to protect people who were dependent on their spouse from losing their means of transportation due to debt and makes no specific reference to the value of the vehicles. If your loved one drove a $100,000.00 car as their daily driver, it would still pass to their heirs without the creditors being able to touch it.

The same statute also applies to the household goods of a decedent's home up to a net value of $20,000.00. Furniture, kitchen appliances, and other personal belongings fall under this category. We have had a few overzealous clients in the past who have responded to our request for an estate inventory with a complete detailed list of every appliance, fixture, and furniture set listed, and while we appreciate the effort, for the purposes of probate, this usually isn't necessary. Intestate estates, should The will of the decedent directs that specific tangible items be bequeathed to certain specific persons, The personal Representative would need to abide by the terms of the Will.

In intestate estates, the Personal Representative will need to decide how these items are disposed of. In these cases, generally speaking, the family members of the deceased can come to some sort of agreement regarding the personal property of the decedent, but in the cases where disputes arise, the solution is to hold an estate sale. This compromise, while achieving the most fair result possible, will cause the exemption to lapse. Any funds that arise from the sale of the property of the deceased would need to be placed into an estate account and reported to the court via the Inventory of the Estate and these funds would no longer be exempt from claims. Cash assets, like bank accounts or revenue from the sale of stocks, can never be exempt. Exceptionally valuable assets worth more than 20,000.00, such as individual pieces of jewelry or fine art, also cannot be exempted.

These laws are in place to protect the families of the deceased from financial struggles brought about by their death and to ensure that day-to-day life can continue after their loved one has passed away. Media portrayals of financial ruin brought about by debt often depict the families of the deceased being rendered destitute by ravenous creditors who seize every plank of wood and scrap of dust to settle their affairs, and we want our clients to know that these depictions are the stuff of Hollywood fantasy. In reality, the law is written to protect the bereaved from just this kind of fate, and a probate attorney will be able to help determine which assets of an estate are untouchable and what needs to be filed in court to keep them that way.

If you have questions about Probate issues, don’t wait—make sure your legal rights are protected. Call 863.250.2990 today to schedule your Free Consultation with our Probate attorneys.