CHAPTER 4
 
CLAIMS BY
AND AGAINST THE ESTATE
 

 
 
 
 

C.

Claims Against the Estate
     
   
1.

Creditors’ Rights in Securing Letters

     
   

PEF Code §3155(b) establishes the order of preference of those who may qualify as administrator under a grant of letters of administration. The creditors of the decedent at the time of death are fourth in priority after: (i) those who are entitled to the residuary estate under the will; (ii) the surviving spouse; and (iii) those who are entitled under the intestate law as the Register determines will best administer the estate while giving preference to share size. Unless the prior classes have consented, there is a waiting period of seven (7) days from the date of death before letters can be issued in favor of creditors. See PEF Code §3155(c).

     
2.   Creditors’ Claim
     
    The personal representative gives notice of the grant of letters for the decedent’s estate by advertising the grant of letters once each week for three (3) successive weeks. See PEF Code §3162. The personal representative is required, within three (3) months after the grant of letters, to give notice of the grant to the Department of Revenue or the proper officer of the political subdivision, as the case may be, with respect to claims due the Commonwealth or any political subdivision thereof for maintenance in an institution of a person who has died therein. See PEF Code §3393. The Commonwealth is entitled to recover from the estate payments for medical assistance for nursing facility services, home and community based services, related hospital and prescription drug services and other services to a person age fifty-five (55) or older. See 62 P.S. §1412. The personal representative of a decedent who was at least that old when any such payment was made and who received such assistance during five (5) years prior to death, must notify the Pennsylvania Department of Public Welfare to obtain a statement of the Department’s claim. The Commonwealth pursues recoupment based on its Medical Assistance Estate Recovery Regulations, §§258.1 et seq., 55 Pa. Code Ch. 258, (http://www.pacode.com/secure/data/055/chapter258/chap258toc.html) which became effective on February 1, 2002. The Department forfeits its right to any claim if it does not submit its claim within forty-five (45) days of receipt of such notice from the personal representative. See 62 P.S. §1412(b). The title company insuring the transfer of decedent’s Pennsylvania real estate will typically ask for the Commonwealth’s written confirmation about such a claim.

With respect to claims for federal tax liability, IRC Reg. §301.6903-1 requires notice be given to the Internal Revenue Service by filing Internal Revenue Service Form 56. See Section E, Claims by Internal Revenue Service, below.

If any creditor’s claim remain unpaid when an account has been filed and called for audit, written notice of the audit must be given to such creditor and to every other person known to the accountant to have an interest in the estate as beneficiary, heir or next of kin. See PEF Code §3503. A personal representative who makes distribution of the estate in conformity with a decree of Court after confirmation of an account is relieved of all liability. See PEF Code §3533.

If a creditor has not filed written notice of a claim with the personal representative within one (1) year from the first complete advertisement of letters, and the personal representative is not aware of the claim, the personal representative may distribute personal and real property without the necessity of an accounting and without liability to such claimant. See PEF Code §3532. This does not affect a lien or charge existing at death on decedent’s real or personal property. See PEF Code §3532(b)(3).

     
3.   Statute of Limitations
     
    Local statutes of limitations are no bar to an action by the United States.

The death of a party does not stop the running of the statute of limitations applicable to any claim against the decedent, but any claim that would otherwise be barred within one (1) year after the decedent’s death is not barred until the expiration of one (1) year after the date of his death. In no event is an applicable statute of limitations shortened because of the death of the party involved. See PEF Code §3383.

Starting an action against the estate is not the only way to toll the statute. In accordance with PEF Code §3384, this can be accomplished by:
       
      a.   Giving written notice to the personal representative or his attorney;
           
      b.   Instituting proceedings to compel the filing of an account;
           
      c.   Starting an action against and serving the personal representative;
           
      d.   Substituting the personal representative as a defendant in an action pending against the decedent; or
           
      e.   Receiving a written acknowledgment by the personal representative or the representative’s attorney of record of the claim’s existence.
     
4.   Payment of Claims
     
    If the estate is solvent and the personal representative is satisfied as to the validity of any claim, the personal representative may pay the claim without Court order.

If the estate may be insolvent, great caution should be exercised in payment of any claims. PEF Code §3392 sets forth certain preferences for charges and claims when the estate is insolvent. The order of preference is as follows, without priority as between claims of the same class:
     
      a.   The costs of administration;
           
      b.   The family exemption;
           
      c.   the costs of funeral and burial, as well as the costs for those medicines, medical or nursing services, hospital services (including maintenance) and services performed by any employee of decedent which were provided within six (6) months of decedent’s death;
           
      d.   Rents for occupancy of the decedent’s residence for six (6) months immediately prior to death;
           
      e.   All other claims, including those by the Commonwealth.
           
    In addition, PEF Code §3392 recognizes possible priorities given to claims due as of the date of death to the United States. Compare Weiss Estate, 24 Fiduc. Rep. 138 (O.C. Div. Alleg., 1974) with Hackney Estate, 24 Fiduc. Rep. 639 (O.C. Div. Phila., 1974); see generally Hunter, Debts of Decedent, §8(d).

PEF Code §§3381, 3382 and 3532(b)(3) recognize the priority of liens existing at the date of death.

Unpaid claimants may file a petition for citation in the Orphans’ Court to compel the personal representative of the estate to file an account.
     
5.   Judgment Creditors
     
    A judgment which is a lien on real estate owned by a decedent at the time of the decedent’s death or on real estate the decedent conveyed by unrecorded deed during the decedent’s lifetime continues to bind the real estate for the longer of five (5) years from its inception or last revival, or for one (1) year following the decedent’s death, even though not revived after the decedent’s death, and during such period the priority maintains its rank as of the time of death. See PEF Code §3382.
     
6.   Execution on Judgments
     
    No levy or execution is permitted upon any real or personal property of a decedent’s estate by virtue of a judgment against the decedent or the decedent’s personal representative unless (i) agreed to by the personal representative in a writing filed in the proceeding giving rise to the judgment or (ii) approved by the Orphans’ Court. In the latter case, the Court may require or waive the giving of notice to the personal representative or other parties in interest. See PEF Code §3377.

The foregoing restrictions do not apply to actions to enforce mortgages, ground rents, pledges or conditional sales of real or personal property. See PEF Code §3377(b).
     
7.   Claims Not Reduced to Judgment
     
    A personal representative, at his or her own risk and without the filing, audit or confirmation of an account, may distribute real or personal property without liability to any claimant who has not given notice of his claim within one (1) year after the first complete advertisement of the grant of letters or prior to such distribution. See PEF Code §3532(a).

No claimant shall have any claim against distributed personal property unless such claimant’s claim is known to the personal representative within one (1) year after the first complete advertisement or prior to distribution. See PEF Code §3532(b)(1).

No claimant shall have any claim against distributed real property unless such claimant has, within one (1) year after the decedent’s death, filed a written notice of claim with the Clerk of Court. Such claim against real property shall expire at the end of five (5) years after the decedent’s death unless, within that time, the personal representative files an account or the claimant files a petition to compel an accounting. See PEF Code §3532(b)(2).

Under PEF Code §3532(b.1), a personal representative may, by mail or delivery, make written demand of a person who may have a claim against the estate but has never before provided written notice of it. If the personal representative asks such a person to give written notice of such claim within sixty (60) days from the mailing or delivery of the demand, or within one (1) year from the first complete advertisement of the grant of letters if later, the failure to do so precludes such person from bringing a claim under PEF Code §§3532(a) or 3532(b)(1) and the person has no right to receive notice of the filing of the personal representative’s account and its call for audit or confirmation. The personal representative is not required to make or not make such a demand under this provision.

A personal representative may file with the Clerk of Court receipts, releases and refunding agreements. Acceptance by the Court shall not be construed as Court approval of any distribution. See PEF Code §3532(c).

     
8.   Specific Performance of Contracts
     
    If an individual makes a legally binding contract to purchase or sell real or personal property and dies before its consummation, the decedent’s representative has the power to consummate it. If the personal representative does not do so, the Court, on the application of the other party, may order specific performance of the agreement if the contract would have been enforced specifically had the decedent not died. See PEF Code §3390.
     
9.   Election Against Will
     
    See Chapter 10.
 

 


 
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