Question on the limits and ethics of financial liability

[MichaelB]

Yesterday at my brother’s house an interesting question came up and I offered to post it here for discussion and share the opinions with him. He is executor for our Aunt’s estate. She passed away earlier this year after losing a lifelong battle with severe rheumatoid arthritis and a more recent problem with a very badly fractured arm that she was unable to recover from. She spent the better part of her final five months in-between a hospital and a rehab / nursing home facility as they tried to repair her arm (successfully) and stop the resulting infections (unsuccessfully). The problem he poses is this:

Her medical insurance was primarily Medicare. Coverage for the rehab center is limited to 100 days, which she exceeded. Her estate is then responsible for copays and coinsurance for those 100 days plus the entire amount for the days following end of coverage. The estate is being probated and has sufficient funds to pay the charges. My Aunt passed away in April and the first probate ruling was in early June. My brother has contacted the rehab facility a number of times asking for billing, and tells us after the most recent call the billing person actually laughed when he said he needed the final bill soon.

Probate establishes six months for creditors to present their claims. His question to me:

If the rehab facility does not present its bill within this period is he bound to set aside funds to pay them or should he just distribute the remaining assets to the inheritors as indicated in the will? Even if the law does not require payment to be made, is it ethical to deny that payment? On the other hand, is it ethical to deny the inheritors their lawful distribution once the creditor’s waiting period has been completed?

The law seems clear, so we are interested in views on the ethics here (please, no politics or policy discussions) and I’m posting in the “FIRE and money” forum because this is very much about money and ethics.

 

[Brett_Cameron]

I think your brother has made a good faith effort to obtain billing. If the rehab center does not provide the bill within the limit set by law, I would have no problem from an ethical standpoint in denying the claim.

 

[73ss454]

I would send a registered letter to the facility telling them of your concerns. I'm sure this is not the first time they have had to deal with this problem. If they don't want to do what they need to do to get paid I say, tough.

 

[Nords]

... and tells us after the most recent call the billing person actually laughed when he said he needed the final bill soon.

Sounds like your executor's going to have the last laugh. Six months is more than enough time for a billing.

The registered letter might motivate management to clear out the backlog, but that's not the estate's problem.

 

[REWahoo]

I have seen this same situation in both my mother's estate (my oldest brother was the executor) and my father-in-law's estate (my BIL was the executor). In both cases the final settlement of the estate did not occur for more than a year after the death of the estate holder.

In both cases all creditors were paid in full even though it took longer than six months to receive all the bills. In the case of my FIL's estate, a partial distribution was made to the heirs around the six month point, but sufficient funds to cover the known outstanding amounts were retained until the final bills were received.

Had they a say it the matter, the deceased in both cases would have insisted their bills be paid in full, and the executors honored their memory by doing so.

 

[chinaco]

It seems to me that your brother did the right thing. As an executor, he is trying to do the administrative work and clear debts. If they have been notified several times... then IMO he is trying to do his duty.. however the legal issues are a different matter.


You might have the attorney send a registered letter to the facility. That way he can show some evidence that he did the due diligence effort.


Again, discuss it with your attorney.

 

[donheff]

I would consult a lawyer to be sure that I was following the letter of the law and was not subject to some sort of a personal tort. If the law sets a limit (e.g. 6 months) for a notified party to submit claims against the estate I would distribute the funds to the heirs and forget about the rehab center. They obviously don't give a sh** if they get paid so why should they hold things up for the heirs? If anyone has a complaint against the executor it would seem to be the heirs. Why should distribution be delayed - especially in these troubled financial times?

 

[Meadbh]

I would definitely check with a lawyer in your jurisdiction. A simple Google search yielded this document:

http://www.ca.uky.edu/agc/pubs/fcs5/fcs5436/fcs5436.pdf

which includes this quote:

"The final settlement with the probate clerk may be filed
any time after six months following the date of appointment
as executor and must be filed at least two years following
appointment."

 

[GregLee]

Just so long as there's no distinction between making a claim and sending a bill. After all, you all did learn somehow, within the time limit, that the rehab place was owed money -- just not the exact amount.

And, you know, just because the executor and heirs are legally in the right, that wouldn't necessarily prevent the rehab place from trying to get their money. It could be a pain.

 

[chinaco]

... They obviously don't give a sh** if they get paid so we should they hold things up for the heirs? ...

Well, the person he talked to seemed to not be concerned.

However, someone else in that business (an owner or manager) might be.

I have not seen too many businesses not interesting in collecting debts owed to them.

 

[donheff]

Well, the person he talked to seemed to not be concerned.

However, someone else in that business (an owner or manager) might be.

I have not seen too many businesses not interesting in collecting debts owed to them.

You may be correct. But if they have been properly notified and fail to take action they clearly don't care enough to take care of business. The laughter from the staffer speaks volumes about the company. The laughter is probably closer to disdain for their poorly run organization.

 

[Chuckanut]

My gut reaction is that the money is owed to the rehab center so it must be paid, in six months or a year. It is a debt that must be paid and that is only fair.

That said, the rehab center must realize that the estate needs to be liquidated and divided up among the heirs. That can't be done accurately if the rehab center does not present its bill in a timely manner. It is not fair for the rehab center to keep the heirs waiting indefinetly for their inheritance. You also need to legally protect yourself and the estate, so I agree that having a lawyer contact them, citing chapter and verse about the 6 month rule and anything else that may apply, is a good idea.

 

[haha]

I fail to see what ethics has to do with it. Use an attorney, follow the letter of the law, and if the creditors don't get their act together, good!

Ha

 

[devans0]

What happens if the scrooge faction of the family throws a fit, running to their lawyer, because the executor is giving money away to people that aren't legally entitled?

Make efforts for ethics sake, but if they cannot run their business, you still have your obligations.

FWIW, 2 years later, I am still seeing bills straggle in. Fortunately, or maybe because of insurance, they are being paid this late. I don't have any out of pocket expenses.

 

[W2R]

I'd check with the estate lawyer, and send the registered letter (or, even better, have him send one - - lawyers are good at this sort of thing IMO).

In my opinion you really want to get this taken care of, so that it doesn't come back to haunt you later on.

 

[Independent]

I'm treating the question as ethics, not legality, assuming the legal position is that the creditors have 6 months.

I would go about settling the estate with all deliberate speed. If one creditor gets there after 6 months and also after I've distributed the assets (which could be at 9 months or some other date), tough. They have a right to be paid, but they don't have a right to drag the thing out forever.

 

[clifp]

I fail to see what ethics has to do with it. Use an attorney, follow the letter of the law, and if the creditors don't get their act together, good!

Ha

I think your brother has more than a satisfied the ethical question. If he got the brush off from the center's billing department, well screw them.

Follow the letter of the law.

 

[Gumby]

An executor is in a difficult ethical position. He or she owes duties to two completely different groups of people, whose interests are directly contrary to one another. Specifically, the executor must: 1) pay legitimate creditor claims against the decedent's estate; and 2) pay over the bequests to the heirs. Certainly, legitimate creditors deserve to be paid promptly and fully. But the heirs also have a legitimate interest in receiving their bequests in a reasonable period of time, not subject to bogus claims, or more immediate to the scenario, to the whims of a lackadaisical creditor. How is a reasonable executor to properly balance these competing interests?

Fortunately, the law recognizes that no man can serve two masters. Accordingly, the law establishes a regularized process for administering the estate that relieves the executor of this burden. The law establishes a bar date for claims. Creditors know that if they submit their claims within the bar date, they will get paid. If they are late, they will not. Heirs know that they need not wait forever and that the distribution can occur after all the claims are properly submitted and paid. The law, then, precisely establishes the executor's ethical duties. Follow the rules as written and you have done your duty. Deviate because you have some different notion of propriety and you will have failed of your duties.

 

[Brat]

+ 5 Gumby

 

[youbet]

Proceed with the probate at the six month point. But, be absolutely sure (emphasize it in a special note) that the court is aware that money is owed the rehab center but that the rehab center has not submitted an amount for payment. Let the court decide how to proceed from there. If the court decides that the rehab center has missed its deadline and need not be paid, obey.

 

[arebelspy]

Proceed with the probate at the six month point. But, be absolutely sure (emphasize it in a special note) that the court is aware that money is owed the rehab center but that the rehab center has not submitted an amount for payment. Let the court decide how to proceed from there. If the court decides that the rehab center has missed its deadline and need not be paid, obey.

And be prepared to submit documentation to that effect.

 

[flyfishnevada]

Were going through this right now. Probate is the process. We have informed verbally all the creditors and payees we know of and in a week or so all the official letters will go out. Only one has taken the opportunity to do anything about billing the estate even though most have known since April.

Tough luck! The law is the law and there are plenty of opportunities for them to submit bills. If they do not, the laws says they don't get paid. Would they cancel the bill if you ran out of money and you and the heirs had nothing left? I doubt it, so why pay them if they fail to simply submit a bill?

And really that's you should have a lawyer. To insure the process is follows and documented correctly so it is easy for a judge to determine due diligence was done.

 

[chinaco]

You may be correct. But if they have been properly notified and fail to take action they clearly don't care enough to take care of business. The laughter from the staffer speaks volumes about the company. The laughter is probably closer to disdain for their poorly run organization.

Don't get me wrong... that was very poor behavior and could not have been how the company wanted to represent their orgranization.

My point... if that business has a bad employee... it is not a good reason to not pay them. Chances are someone is likely to come looking for their money anyway. I have to believe they have an billing and accounting department that follows up on that sort of thing.


I would notify them with a registered letter... I would have the attorney do it and retain it in the files... and move on with the process.

That way if the issue ever comes up after it is done, I could prove I was making reasonable efforts to complete the job.


Just from a practical POV..

One thing the executor (usually) tries to do is to close it up as quickly as possible. But everything has to be accounted for to the court. Bills that show up late just cause everyone more hassle.. documents that account for every penny have to be changed, reviewed again.... even down to interest accrued on accounts.

If I were the executor... I would want to get the bill settled. Because if there are any problems... I am the one that will have to deal with it!!!

 

[clifp]

+10 Gumby.

One of the nice things about this forum are there actual experts about certain subjects.
Except of course investing and bacon

 

[JOHNNIE36]

I agree that a certified letter is good for starters and then see what happens. Also, you could discuss with the heirs, the possibility of setting up an escroe account to pay the assisted living facility at a later date. Any monies remaining after that payment would be divided among the heirs. This may allow you to proceed with the distribution of the estate.