Tenth Annual Probate Administration

November 13, 2014

Chapter 7 11:15: 12:00pm Creditor Claim Process and Procedure Mark Vohr, Aiken St. Louis & Siljeg PS There is no PowerPoint for this Presentation Electronic format only:

1. Creditor Claims 2. Creditor Claims Ex. A 3. Creditor Claims Ex. B 4. Creditor Claims Ex. C 5. Creditor Claims Ex. D 6. Creditor Claims Ex. E 7. Creditor Claims Ex. F

Chapter 11.40/11.42 RCW

Claims Against Estate

MARK C. VOHR

AIKEN, ST. LOUIS, & SILJEG, P.S. 801 Second Ave. Suite 1200

Seattle, WA 98104 Telephone (206) 624-2650

Fax (206) 623-5764 E-mail vohr@aiken.com

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1. Introduction

In this section we address claims against the estate of a deceased person. When a person dies, the personal representative or trustee must address claims against the decedent’s estate if they are to perform their duties properly. These procedures for addressing creditor claims should be reviewed with the personal representative or trustee in the first meeting.

Washington law provides a statutory scheme for handling creditor claims. A personal representative or trustee is not required to provide notice to the creditors of the estate. However, often there are substantial benefits to doing so. The benefit is a bar against unsecured creditor’s claims presented outside of a time limit imposed by the statute and an orderly and predictable procedure for addressing claims that are properly presented.

This outline will discuss the statutory procedures for addressing claims against the estate of a deceased person under RCW 11.40 (probate estate) and RCW 11.42 (non-probate estate). In light of the proliferation of living trusts as a form of estate planing, RCW 11.42 recognized the need for a formal procedure for addressing claims against an estate that was not subject to probate. Prior to 1995, the only way to take advantage of the bar against unsecured creditor claims against the estate of a deceased person was to initiate a probate proceeding. Effective January 1st, 1995 the legislature enacted new legislation codified as RCW 11.42 providing a statutory scheme to give the same benefit to estates for which there was no probate. Because of the similarity between RCW 11.40 and RCW 11.42, the reader can generally assume that this discussion applies to both. However, towards the end of the outline, certain difference due to the differing nature of the two procedures will be discussed. The procedure for both is generally referred to in this outline as the Statutory Claims procedure.

2. Which Claims Are Covered under the Statutory Claims Procedure?

Although Statutory Claims are claims against the estate, the title can be misleading. The Statutory Claims procedure applies only to claims against the decedent, which are chargeable against his estate. RCW 11.40.010, also called the “nonclaim statute” provides, “A person having a claim against the decedent may not maintain an action on the claim unless a personal representative has been appointed and the claimant has presented the claim as set forth in this chapter.” (Emphasis added). The estate may be the entity liable for the claim – but to take advantage of the Statutory Claims procedure, the claim must be valid against the decedent before he or she became deceased. (See also RCW 11.40.051, which applies the bar against claims only to claims against the decedent.)

2.1. Administrative Expenses Are Not Subject to the Bar.

Claims which arise as a result of the death to the decedent but arise after death, such as funeral and burial expenses, or those which arise as an expense of administration, are not claims against the decedent within the meaning of this provision. See Peoples Nat’l Bank v. Livingston, 8 Wn. App. 519, 507 P.2d 902, review denied, 82 Wn.2d 1010 (1973). Contrast these claims against a claim for the expense of the last illness – which is a valid claim incurred within the lifetime of the decedent – for which a claim must be filed. See Zuber v. Dorey, 62

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Wn.2d 152, 381 P.2d 626 (1963). It should be noted that many of the claims that are not barred by the Creditor Claim period are also superior to creditor claims. See RCW 11.76.110.

2.2. Certain Ownership Agreements – Joint Property

Another type of claim that does not come under the Statutory Claims procedure are claims based on ownership interests. Examples of these are joint tenant interests with right of survivorship, (See Gottwig v. Blaine, 59 Wn. App. 99, 795 P.2d 1196 (1990)).

2.3. Claims that May be Offset

There is no bar to claims which might set-off claims filed by a personal representative. See Larson v. A.W. Larson Constr. Co., 36 Wn.2d 271, 217 P.2d 789 (1950). Accordingly, if the bar against the claim against the estate would otherwise apply, the bar is lifted to the extent the debt may be used to offset a subsequent claim filed by the personal representative. This exclusion warrants careful consideration by the personal representative before filing a lawsuit to collect money after the passage of the claim period.

2.4. Secured Creditors

Secured creditors, at least to the extent of their security, are not barred by the Statutory Claims procedure. RCW 11.40.135 provides that “[I]f a creditor's claim is secured by any property of the decedent, [RCW 11.40] does not affect the right of a creditor to realize on the creditor's security, whether or not the creditor presented the claim in the manner provided in RCW 11.40.070. It is important to note that this section only permits the secured creditor to realize on the creditor’s security. It is does not allow the creditor to collect on a deficiency unless the secured creditor also files a Statutory Claim for the deficiency. (See In re Estate of Hoffman, 15 Wn. App. 307, 310 (1975). An unsecured promissory note is generally barred unless the holder complies with the Statutory Claims procedure. (See Storlie v. Sachse, 165 Wash. 291, 5 P.2d 342 (1931)).

2.5. Specific Performance

Actions for specific performance of a contract not subject to the bar. Southwick v. Southwick, 34 Wn.2d 464, 208 P.2d 1187 (1949); Baird v. Knutzen, 49 Wn.2d 308, 301 P.2d 375 (1956).

2.6. Leases

The estate may be liable for the unexpired term of a lease agreement – even though the unexpired term comes after the date of death. In James v. Corvin, 184 Wash. 356, 359 (1935) the court held the claim for damages for the unexpired portion of the lease is not an obligation incurred by the administratrix in the course of her administration of the estate. It arises out of a contractual obligation incurred by the decedent and is governed by the Statutory Claims procedure. Under the terms of the lease, the decedent obligated himself, his heirs, executors, administrators and assigns to pay $ 4,860 for the premises for a term of five years, covering the time involved in this action. A claim for damages for a breach of that contract arises out of

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that obligation, requiring, as a prerequisite to a suit thereon, that the claim be served on the administratrix and filed with the clerk of the court. Two lessons here: One, the estate may be on the hook for the unexpired term of the lease, and two, the landlord must file a creditor’s claim. From a practice prospective, when representing a lessee, one might want to provide that the lease terminates upon the death of the lessee. Good luck here, most leases state that the obligation continues against the heirs, administrators, etc. It would seem that this may be the case whether or not the lease includes the language.

What about a decedent who personally guaranteed a lease? In In the Matter of the Estate of Stephen Earls, 167 Wn.App 447, 262 P.3d 832 (Div. 1 2011), the creditor brought an action against the estate of a guarantor seeking recovery under a defaulted lease.

The decedent, Stephen Earls, was president of the Stephen Earls Corporation. On March 15, 2005, the corporation, as tenant, and Bay West Design Center, LLC, as lessor, entered into a 10–year lease of premises at the Seattle Design Center. Bay West is predecessor in interest to appellant Hines REIT Seattle Design Center, LLC (Hines).

Earls signed a personal guaranty in which he guaranteed to the lessor and its successors and assigns “the full and timely performance and observance by Tenant of all the terms and conditions of the Lease to be performed and observed by Tenant.” Earls' liability under the guaranty was primary and absolute, allowing the lessor to proceed against him without proceeding against the corporation. The guaranty also provides that in the event of Earls' death, the guarantee would remain in full force and effect and be binding upon Earls' estate.

Earls died on October 17, 2008. Barry Wolf was appointed personal representative of Earls' estate the same day. At the time of Earls' death, the Stephen Earls Corporation was in compliance with the lease. On October 24, 2008, Wolf published a notice to creditors and, on October 30, 2008, sent the notice to Hines by certified mail. The period for filing creditor's claims expired on February 24, 2009. Hines did not file or present a creditor's claim before the filing period expired.

In August 2009, the Stephen Earls Corporation partially defaulted under the lease. In January 2010, Hines filed a petition under the Trust and Estates Dispute Resolution Act (TEDRA), chapter 11.96A, seeking to enforce the personal guaranty. The Estate argued that Hines' petition was barred because Hines failed to timely file a creditor's claim. A superior court commissioner agreed with the Estate and entered an order dismissing Hines' petition with prejudice and awarding the Estate its reasonable attorney fees and costs. Hines moved for revision of the commissioner's ruling. The superior court denied Hines' motion and ordered Hines to pay the Estate's reasonable attorney fees and costs incurred in connection with the motion for revision. Hines appealed.

The issue before the Court of Appeals was whether Hines was required to file a creditor's claim where Earls' obligation under the personal guaranty, which he executed during his lifetime, did not arise until after the claims filing period expired. The Court reasoned that Earls incurred a contractual obligation under the personal guaranty during his lifetime. His liability under the guaranty was primary, such that Hines could proceed against Earls for any

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breach of the lease by the tenant without first proceeding against the tenant. Further, the guaranty specifically stated that it would remain in full force and effect upon Earls' death and be binding on his estate. Hines' claim against Earls for the tenant's breach of the lease arose out of Earls' obligation under the guaranty; it was not an obligation his estate incurred. Accordingly, the Court of Appeals ruled that Hines had to file and serve a creditor's claim in order to maintain an action on that claim. The significant factor is that Hines' claim against Earls arose out of a contractual obligation Earls incurred during his lifetime. It did not matter that the claim was contingent at the time of his death.

Another timing issue arose under In the recent case Re the Estate of Catherine Hennington, ____ Wn. App. ____, 331 P.3d 112 (2014). In that case the issue was whether the filing of a creditor claim in an estate tolled the otherwise applicable statute of limitations. In ruling against the claimant, the court said “Limitations on actions against a person who dies before the expiration of the time otherwise limited for commencement thereof are as set forth in chapter 11.40 RCW.” A creditor must then follow the claims procedures established in chapter 11.40 RCW or be forever barred from making a claim or commencing an action against the decedent. However, if the claim or action is barred by other applicable statutes, it cannot be pursued. In re Estate of Hennington, 331 P.3d 112, 114 (Wash. Ct. App. 2014)

2.7. Claims Covered by Insurance

RCW 11.40.060 addressed claims covered by insurance. It provides that the time limitations for presenting claims do not accrue to the benefit of any liability or casualty insurer. Claims against the decedent or the decedent's marital community that can be fully satisfied by applicable insurance coverage or proceeds need not be presented within the time limitation of RCW 11.40.051, but the amount of recovery cannot exceed the amount of the insurance. The claims may at any time be presented as provided in RCW 11.40.070, subject to the otherwise relevant statutes of limitations, and do not constitute a cloud, lien, or encumbrance upon the title to the decedent's probate or nonprobate assets nor delay or prevent the conclusion of probate proceedings or the transfer or distribution of assets of the estate. This section does not serve to extend any otherwise relevant statutes of limitations.

Because the insurance claims do not create a cloud on the title to the decedent’s property, it is not necessary to keep an estate open because of the existence of claims that may be covered by insurance. However, from a practical perspective, if the claim is going to be litigated, the personal representative is a necessary party to the claim against the estate (See RCW 11.40.100(1)) and should remain in place until the completion of the action.

2.8. What if the personal representative is also a creditor of the estate?

RCW 11.40.140 provides that if the personal representative has a claim against the decedent, the personal representative must present the claim in the manner provided in RCW 11.40.070 and petition the court for allowance or rejection. The petition must be filed under RCW 11.96A.080. This section applies whether or not the personal representative is acting under nonintervention powers. The reference to RCW 11.96A.080 is a little vague, however I have always read it to mean that notice of the hearing on the personal representative’s claims

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against the estate must be personally served of mailed to all interested parties at least 20 days prior to the date of the hearing.

2.9. What if a decedent was a defendant in a lawsuit at the time of his or her death?

RCW 11.40.110 provides that if an action is pending against the decedent at the time of the decedent's death, the plaintiff shall, within four months after appointment of the personal representative, serve on the personal representative a petition to have the personal representative substituted as defendant in the action. Upon hearing on the petition, the personal representative shall be substituted, unless, at or before the hearing, the claim of the plaintiff, together with costs, is allowed. It is important to note that since presumably the lawsuit arose at the time the decedent was alive, the Statutory Claim statute must be followed. Accordingly prior to serving the petition on the personal representative for substitution, the plaintiff must also file a claim against the estate under RCW 11.40.070 within the 4-month period.

2.10. Community Property Claims

Community property claims warrant special mention. RCW § 11.02.070 provides that, upon the death of a decedent, a one-half share of the community property shall be confirmed to the surviving spouse, and the other one-half share shall be subject to testamentary disposition by the decedent, or shall descend as provided in chapter 11.04 RCW. However, the whole of the community property is subject to probate administration for all purposes of title 11, including the payment of obligations and debts of the community, the award in lieu of homestead, the allowance for family support, and any other matter for which the community property would be responsible or liable if the decedent were living.

Accordingly, if a creditor wants to get to the community property based on a community debt, he or she must follow the Statutory Claim procedure. Note, the bar only applies to community debts. If the surviving spouse is separately liable, then an action against the surviving spouse is not barred by the Statutory Claim time limits. (See generally Smith v. McLaren, 58 Wn.2d 907, 365 P.2d 331 (1961)

2.11. Preexisting Judgments.

Judgements against the decedent are also claims against the estate, but because of the death, the judgment creditor must now jump through the hoops of the Statutory Claims procedure. RCW 11.40.130 and 11.42.120 provide that if a judgment was entered against the decedent during the decedent's lifetime, an execution may not issue on the judgment after the death of the decedent. The judgment must be presented in the manner provided in RCW 11.40.070, but if the judgment is a lien on any property of the decedent, the property may be sold for the satisfaction of the judgment and the officer making the sale shall account to the personal representative for any surplus.

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3. What Assets are Subject to Creditor’s Claims?

3.1. Generally.

Any asset of the decedent that was subject to satisfaction of a decedent’s general liabilities immediately before the decedent’s death are subject to creditor claims. Creditor claims apply to both probate and non-probate assets. Under RCW § 11.18.200 the beneficiary of such an asset is liable to account to the personal representative to the extent necessary to satisfy liabilities, claims, the asset's fair share of expenses of administration, and the asset's share of estate taxes under chapter 83.110 RCW. Before making demand that a beneficiary of a nonprobate asset account to the personal representative, the personal representative shall give notice to the beneficiary, in the manner provided in chapter 11.96A RCW, that the beneficiary is liable to account under this section.

3.2. Not all Non-Probate Assets are Non-Probate Assets.

Although they pass outside of probate, some assets are specifically excluded from the definition of non-probate assets. Under RCW § 11.02.005 a "Nonprobate asset" does not include: IRA benefits and the benefits payable under many 401(k) plans, a payable-on-death provision of a life insurance policy, annuity, or other similar contract, or of an employee benefit plan; a right or interest passing by descent and distribution under chapter 11.04 RCW; a right or interest if, before death, the person has irrevocably transferred the right or interest, the person has waived the power to transfer it or, in the case of contractual arrangement, the person has waived the unilateral right to rescind or modify the arrangement; or a right or interest held by the person solely in a fiduciary capacity. For the definition of "nonprobate asset" relating to revocation of a provision for a former spouse upon dissolution of marriage or declaration of invalidity of marriage, RCW 11.07.010(5) applies. For the definition of "nonprobate asset" relating to revocation of a provision for a former spouse upon dissolution of marriage or declaration of invalidity of marriage, see RCW 11.07.010(5). For the definition of "nonprobate asset" relating to testamentary disposition of nonprobate assets, see RCW 11.11.010(7). It should be noted, that some of these assets could be subject to creditor claims if they must be abated to satisfy the debts of the decedent.

This is also a good place to mention RCW 48.18.410, which expressly exempts the proceeds of a life insurance policy from any all claims of creditor provide the policy names a beneficiary. If the policy is payable to the estate, then it will be subject to creditor claims.

3.3. Abatement.

What if the personal representative finds that he or she is running out of money to pay the claims against the estate? The Statutory Claims procedure provides a priority list for abating the distributions from the estate to pay the claims.

RCW § 11.10.010 provides a specific order in which property of the estate shall be applied to pay the claims of creditors. Property of a decedent abates, without preference as between real and personal property, in the following order:

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(a) Intestate property; (b) Residuary gifts; (c) General gifts; (d) Specific gifts.

For purposes of abatement a demonstrative gift, defined as a general gift charged on any specific property or fund, is deemed a specific gift to the extent of the value of the property or fund on which it is charged, and a general gift to the extent of a failure or insufficiency of that property or fund. Abatement within each classification is in proportion to the amounts of property each of the beneficiaries would have received if full distribution of the property had been made in accordance with the terms of the will.

If the will expresses an order of abatement, or if the testamentary plan or the express or implied purpose of the devise would be defeated by the statutory order of abatement, a gift abates as may be found necessary to give effect to the intention of the testator.

If the subject of a preferred gift is sold, diminished, or exhausted incident to administration, not including satisfaction of debts or liabilities according to their community or separate status under RCW 11.10.030, abatement must be achieved by appropriate adjustments in, or contribution from, other interests in the remaining assets.

To the extent that the whole of the community property is subject to abatement, the shares of the decedent and of the surviving spouse in the community property abate equally.

If required under RCW 11.10.040, nonprobate assets must abate ratably with those disposed of under the will and passing by intestacy. RCW § 11.10.040 provides that if abatement is necessary among takers of a nonprobate asset, the court shall adopt the abatement order and limitations set out in RCW 11.10.010, 11.10.020, and 11.10.030, assigning categories in similar to those of probate assets within the following considerations: (a) All nonprobate forms of transfer under which an identifiable nonprobate asset passes to a beneficiary or beneficiaries on the event of the decedent's death, such as, but not limited to, joint tenancies and payable-on-death accounts, are categorized as specific bequests and (b) With respect to all other interests passing under nonprobate forms of transfer, each must be categorized in the manner that is most closely comparable to the nature of the transfer of that interest.

As with probate assets, if the nonprobate instrument of transfer or the decedent's will expresses a different order of abatement, or if the decedent's overall dispositive plan or the express or implied purpose of the transfer would be defeated by the order of abatement stated in subsections (1) through (3) of this section, the nonprobate assets abate as may be found necessary to give effect to the intention of the decedent.

4. Basic Procedural Requirements for Giving Notice to Creditors.

As noted above, there is no requirement that a personal representative adopt the Statutory Claim notice procedures. See RCW 11.40.020 “a personal representative may give

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notice to the creditors of the decedent.” However, if notice is given or a claim is filed in the estate, then the personal representative must follow the provisions of the statute.

The requirements for properly providing notice to creditors is conveniently laid out in RCW 11.40.020. The form of the notice is provided in RCW 11.40.030, announcing the personal representative's appointment and requiring that persons having claims against the decedent present their claims within the time specified in RCW 11.40.051 or be forever barred as to claims against the decedent's probate and nonprobate assets. A form of the notice is also provided as Exhibit A to these materials. As a practical matter, have the personal representative sign the probate notice at the same time as they sign the other pleadings needed to open the probate proceeding.

Immediately after the probate is opened, (a) The personal representative must file the notice with the court and (b) The personal representative shall cause the notice to be published once each week for three successive weeks in a legal newspaper in the county in which the estate is being administered. A convenient place to go for a list of newspapers for publishing legal notice to creditors is http://www.wa-probate.com/Instructions/Administering/Legal-Newspapers.htm. There you will find representative Washington legal newspapers and costs for publishing a probate notice to Creditors.

If the decedent was a resident of the state of Washington at the time of death and probate proceedings are commenced in a county other than the county of the decedent's residence, then instead of the requirements (a) and (b) above, the personal representative shall cause the notice to creditors in substantially the form set forth in RCW 11.40.030 to be published once each week for three successive weeks in a legal newspaper in the county of the decedent's residence and shall file the notice with the superior court of the county in which the probate proceedings were commenced. Creditors should file their claims in the county where the probate proceedings were commenced.

Finally, to prove to the court that the notice requirements were completed, the personal representative must file with the court proof by affidavit of the giving and publication of the notice.

4.1. Actual Notice to Creditors

Under RCW 11.40.020(c), the personal representative may, at any time during the probate proceeding, give actual notice to creditors who become known to the personal representative by serving the notice on the creditor or mailing the notice to the creditor at the creditor's last known address, by regular first class mail, postage prepaid. It is worth noting that in all cases the personal representative must also mail a copy of the notice, including the decedent's social security number, to the state of Washington department of social and health services office of financial recovery. Their address is Office of Financial Recovery, Washington Department of Social and Health Services, PO Box 9501, Olympia, WA 98507-9501. RCW 11.40.020(1) flush language also provides that the Personal Representative shall file with the court proof by affidavit of the giving and publication of notice. In order to make this efficient, you can mail all your actual notices and notice to DSHS and then file a

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single affidavit stating all this to whom you have filed notice. Alternatively, you may want to file a specific affidavit or declaration stating that you mailed a notice to creditors to DSHS. A copy of an example of this type of notice is attached as Exhibit F.

We have a recent decision out of division one regarding actual notice to creditors. See Washington Federal Savings v. Klein WL 4069479 (Div. 1, 2013). In this case, Dr. Klein borrowed $375,000 from Washington Federal Savings to purchase a condominium. The promissory note for the loan was secured by a deed a trust. When Dr. Klein died the value of the condominium was less than the outstanding balance due on the note.

A year later, the attorney for the personal representative sent actual notice to creditors to Washington Federal and immediately thereafter filed an affidavit of mailing actual notice to creditors listing, among others, Washington Federal as one of the recipients of actual notice. Washington Federal did not file a creditor claim within 30 days of the personal representative mailing the notice – at least according to the statement in the affidavit.

The estate then went to court with a Petition for Instructions asking the Court to Order Washington Federal to accept a deed in lieu of foreclose in full satisfaction of the note. Washington Federal responded by filing a creditor claim for the deficiency. The dispute in this case was whether Washington Federal was entitled to claim for a deficiency under the note. The Court of Appeals affirmed that Washington’s statutory procedure for providing actual notice to known creditors of the decedent was satisfied by establishing proof of mailing the notice without regard to proof of receipt by the creditor and ruled that Washington Federal’s claim was barred by the statute of limitations. In affirming the Superior Court the Court of Appeals held that 11.40.020(c) only require service or mailing of the notice of creditors to satisfy the requirement to give actual notice. The statute did not require proof of delivery. As a fun fact, because the promissory note included a prevailing party provision, the court of appeals affirmed the trial court’s award of attorney fees and cost and also awarded attorney fees and costs to the estate for the appeal.

4.2. When should you Mail Actual Notice to Creditors?

It may not make much difference, but the notice requirement suggest there is no benefit to mailing actual notice to reasonably ascertainable creditors prior to 30 days before the end of the four month creditor claim period. It may be worthwhile from an efficiency standpoint to list all the reasonably ascertainable creditors and then mail out all the notices at once. The reasoning behind this logic is that reasonably ascertainable creditors have the lesser of 30 days after receiving actual notice or 24 months to file claims against the estate. One also wants to close the estate with the knowledge that all liability has been cut off.

5. Claims — Form — Manner of presentation — Waiver of defects. RCW 11.40.070

In order to properly present a claim to the estate for a decedent, the creditor must follow the Statutory Claim procedure set forth in RCW 11.40.070. This statute set requires that the claimant, the claimant's attorney, or the claimant's agent must sign the claim and include in the claim the following information:

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(a) The name and address of the claimant;

(b) The name, address, if different from that of the claimant, and nature of authority of an agent signing the claim on behalf of the claimant;

(c) A statement of the facts or circumstances constituting the basis of the claim;

(d) The amount of the claim; and

(e) If the claim is secured, unliquidated, contingent, or not yet due, the nature of the security, the nature of the uncertainty, if any, or the date when it will become due.

A form for use for a creditor claim is attached as Exhibit B. Failure to describe correctly the information in (c), (d), or (e) (see above), if the failure is not substantially misleading, does not invalidate the claim. There are not too many cases describing what is meant by substantially misleading. In the recent case of Villegas v. McBride, 112 Wn. App. 689 (2002) review denied, 149 Wn.2d 1005, 70 P.3d 965 (2003) the creditor argued:

That the "not substantially misleading" clause does not apply to a total failure to provide the information RCW 11.40.070(1) requires because the exception applies only to "[f]ailure[s] to describe correctly." RCW 11.40.070(1) does not require that a creditor's claim be elaborate so long as it is sufficient to advise the personal representative of the nature of the claim. But Villegas did not provide any of the information subsection (1)(c) requires. While Villegas' misstatement about the amount of her claim might be excused under the "not substantially misleading” proviso, it is illogical to assume the legislature meant to apply it to a total failure to provide required information. A lack of information by definition is neither misleading nor not misleading. It is simply absent. We therefore hold that Villegas' claim failed to satisfy RCW 11.40.070(1)(c) and the "not substantially misleading" exception does not excuse the failure because it does not apply to an omission of required information. The safety valve for creditor claims that fail to satisfy RCW 11.40.070(1) is found in subsection (4), permitting a "personal representative [to] waive formal defects and elect to treat the demand as a claim properly filed under this chapter[.]" Villegas 112 Wn. App. At 695.

Villegas should be contrasted to earlier law, which require strict adherence to the Statutory Claim requirement. (See Messer v. Estate of Shannon, 65 Wn.2d 414, 415 (Wash. 1964)).

A claim does not need to be supported by affidavit. A claim must be presented within the time limits set forth in RCW 11.40.051 by: (a) Serving on or mailing to, by regular first class mail, the personal representative or the personal representative's attorney a copy of the signed claim; and (b) filing the original of the signed claim with the court in which probate proceedings were commenced. A claim is deemed presented upon the later of the date of

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postmark or service on the personal representative, or the personal representative's attorney, and filing with the court.

As noted in Villegas, if a claimant makes a written demand for payment within the time limits set forth in RCW 11.40.051, the personal representative may waive formal defects and elect to treat the demand as a claim properly filed under this chapter if: (a) The claim was due; (b) the amount paid is the amount of indebtedness over and above all payments and offsets; (c) the estate is solvent; and (d) the payment is made in good faith. In connection with the filing of claims by a creditor, a personal representative always has at his or her disposal the defenses of the doctrines of waiver, estoppel, or detrimental claims or any other equitable principle.

While there may be some flexibility in the content of the claim. It should be noted that there is no flexibility in requirement that the creditor file a claim consistent with RCW 11.40.070. (See Cloud v. Summers 98 Wn. App. 724, 991 P.2d 1169 (1999)).

6. Claims — Duty to allow or reject — Notice of petition to allow — Attorneys' fees – RCW 11.40.080

Once a properly presented claim is presented in the manner provided in RCW 11.40.070, the personal representative has a duty to allow or reject all such claims. In doing so, the personal representative may allow or reject a claim in whole or in part.

6.1. Time Limits to Allow or Reject

If the personal representative has not allowed or rejected a claim within the later of four months from the date of first publication of the notice to creditors or thirty days from presentation of the claim, the claimant may serve written notice on the personal representative that the claimant will petition the court to have the claim allowed.

6.2. Potential for Award of Attorney Fees if Claim is not Properly Accepted or Rejected

If the personal representative fails to notify the claimant of the allowance or rejection of the claim within twenty days after the personal representative's receipt of the claimant's notice, the claimant may petition the court for a hearing to determine whether the claim should be allowed or rejected, in whole or in part. If the court substantially allows the claim, the court may allow the petitioner reasonable attorneys' fees chargeable against the estate.

Attached as Exhibit C to these materials is a copy of a form that may be used to accept a creditor’s claims. Attached as Exhibit D to these materials is a form for rejection of a creditor’s claim.

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7. Allowance of claims — Notice — Automatic allowance — Petition for extension — Ranking of claims — Barred claims – RCW 11.40.090.

If the personal representative allows a claim, the personal representative must notify the claimant of the allowance by personal service or regular first class mail to the address stated on the claim.

7.1. Claims Not Exceeding $1,000.00 Will be Deemed Allowed

A claim that on its face does not exceed one thousand dollars must be deemed allowed and may not thereafter be rejected unless the personal representative has notified the claimant of rejection of the claim within the later of six months from the date of first publication of the notice to creditors and two months from the personal representative's receipt of the claim. The personal representative may petition for an order extending the period for automatic allowance of the claims.

7.2. Document the Treatment of the Claim – and Communicate with the Creditor

Once a claim is allowed, the claim must be added to the inventory and reflected in the accounting of the estate. Finally, the claim must be paid expeditiously in the course of administration. If the claim creates a cash flow problem, you should immediately communicate this to the creditor and provide them with a good faith estimate of when the creditor can expect to be paid.

7.3. Can the Personal Representative Just Pay a Claim?

A claim may not be allowed if it is barred by a statute of limitations. I have always viewed this as a potential area of breach of fiduciary duty by the personal representative. I generally instruct the personal representative not to pay any debts of the estate unless they are properly presented to the estate. However, I have not found any authority supporting this position.

From a practical standpoint, certain debts or bills, whether properly presented or not, should just get paid if the estate can do so, or even if it can not, the personal representative should loan money to the estate to pay. For example, any debts secured by property of the estate should probably get paid to avoid foreclosure action and the increased cost associated with such actions, which would be chargeable against the estate. Also, debts for basic utilities provided to real property should get paid so they are not turned off by the utility company. Also, some debts may result in liens against real property if not paid, e.g. property taxes, Seattle Public Utility bills. In my mind, it does not make any sense not to pay a debt that would cost more money to reject.

Because the personal representative owes a duty to the beneficiaries. I would never suggest that a personal representative just pay a debt unless there is reasonable support for doing so, especially if one could argue the personal representative had a conflict on interest in preferring one debt over another, or in paying a debt that was uncertain as to its validity.

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8. Rejection of claim — Time limits — Notice — Compromise of claim – RCW 11.40.100

If the personal representative rejects a claim, in whole or in part, the claimant must bring suit against the personal representative within thirty days after notification of rejection or the claim is forever barred. The notice date is the postmarked date. The personal representative must notify the claimant of the rejection and file an affidavit with the court showing the notification and the date of the notification. The personal representative shall notify the claimant of the rejection by personal service or certified mail addressed to the claimant or the claimant's agent, if applicable, at the address stated in the claim. The date of service or of the postmark is the date of notification. The notification must advise the claimant that the claimant must bring suit in the proper court against the personal representative within thirty days after notification of rejection or the claim will be forever barred.

The interplay of all these timing rules can get a bit complicated but the requirement that the claimant bring their claim within 30 days after receiving notice of rejection is a hard and fast rule. Consider In Re Estate of T. Mark Stover, 178 Wn. App 550, 315 P3d 579 (2013). On September 16, 2011, Vaux–Michel filed a claim against Stover's estate. She alleged he had written a $150,000 check as a gift to her in anticipation of his death. When the personal representative failed to act on the claim, Vaux–Michel sent notice to the personal representative on October 19, 2011, that she intended to petition the court to allow the claim. On December 19, 2011, the personal representative rejected the claim. On January 23, 2012, Vaux–Michel petitioned the court to allow the claim. The trial court denied the personal representative's motion to dismiss the suit as untimely under RCW 11.40.100(1). A commissioner of this court denied the personal representative's motion for discretionary review. The case proceeded to a bench trial. After the close of evidence, the court ruled in Vaux–Michel's favor, entered judgment for $150,000, and awarded attorney fees and costs.

According to the trial court, because personal representative failed to reject or allow, in part or in whole, Ms. Vaux–Michel's claim within thirty days of notice of the claim, RCW 11.40.100, and then failed to reject or allow, in part or in whole, Ms. Vaux–Michel's claim within twenty days after receiving notice that Ms. Vaux–Michel would petition the Court to allow the claim, RCW 11.40.080, Respondent no longer had statutory authority to reject Ms. Vaux–Michel's claim and, therefore, Ms. Vaux–Michel had a reasonable time within which to file her petition. RCW 11.40.080(2). The provisions of RCW 11.40.100 ceased to be applicable when Respondent failed to exercise her rights thereunder by her failure to reject or allow, in part or in whole, Ms. Vaux– Michel's claim within 20 days after receiving notice.

Just to review the timelines here –

Sept. 16, 2011: Vaux–Michel notified the personal representative of her $150,000 claim.

Oct. 18, 2011: Vaux–Michel notified the personal representative of her intent to petition the court to allow the claim.

Dec. 19, 2011: The estate postmarked its notification of rejection.

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Jan. 23, 2012: Vaux–Michel petitioned the court to allow her claim. (

The estate argued that Vaux–Michel's creditor claim is time barred under the plain language of RCW 11.40.100(1), regardless of the estate's noncompliance with RCW 11.40.080(2)'s time requirements. Vaux–Michel argued two grounds as to why her suit is timely. First, that the estate's failure to timely accept or reject her claim within the time periods provided for under RCW 11.40.080(2) means her claim was ripe for adjudication, claim rejection no longer served a purpose, and she filed suit within a reasonable time. Second, she argues her suit is timely because CR 6(e) adds three extra days to the prescribed period.

With respect to CR 6(e), basically Vaux-Michael argues the if the thirty day period of RCW 11.40.100 were applicable, the personal representative mailed her rejection on December 19, 2011, Ms. Vaux–Michel received notice on, and had thirty days after December 19, 2011, to file her petition. Thirty days after December 19, 2011 was Wednesday, January 18, 2012, with three additional days for mailing (CR 6(e)), the date to file fell on Saturday January 20, 2012, which put “the first day other than a Saturday, Sunday or legal holiday, following the third day,” on Monday, January 23, 2012. So, basically, applying CR 6(e) in this manner, Ms. Vaux–Michel argues that her claim filed 35 days after notice is timely.

The court of appeals did not agree with Ms. Vaux-Michel. The court reasoned RCW 11.40.100(1) plainly states that a claimant like Vaux–Michel “must bring suit against the personal representative within thirty days after notification of rejection or the claim is forever barred.” Our Supreme Court held that CR 6(a), the time computation rule that excludes weekends and holidays from periods of less than seven days, did not apply to RCW 59.12.030(3)'s three-day period for a landlord to commence an unlawful detainer action after serving notice. Applying the plain meaning rule to the statutory term “day,” the court reasoned:

The statute [RCW 59.12.030(3) ] does not specify whether “day” means a business day, court day, or calendar day. There are no time calculation provisions in chapter 59.12 RCW. The ordinary meaning of “day” is a 24 hour period beginning at midnight. See Webster's Third New International Dictionary 578 (2002) (defining “day” as a “CIVIL DAY [ ] among most modern nations : the mean solar day of 24 hours beginning at mean midnight”); id. at 316 (defining “calendar day” as “a civil day: the time from midnight to midnight”); see also 74 AM.JuR.2d Time § 10 (2001) (“[a] ‘day’ generally means a calendar day”). Using the ordinary meaning of day, weekends and holidays would be included in the calculation of the three day notice period.

As in Christensen, the statute here does not specify whether “day” means a business day, court day, or calendar day. Accordingly, we apply the ordinary meaning of “day,” which includes weekends. “In the absence of a specific statutory definition, words in a statute are given their common law or ordinary meaning.” Vaux–Michel's suit is untimely because she petitioned the court to allow her claim 35 calendar days after notification of rejection.

The court also did not agree that noncompliance with RCW 11.40.080(2)'s time provisions, as a matter of law, dispensed with any obligation on her part to bring suit within

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RCW 11.40.100(1)'s 30–day deadline. It reasoned this argument is not supported by any relevant case authority and, as discussed above, is contrary to the plain meaning of the statute. Nor did Ms. Vaux-Michel identify any provision in chapter 11.40's comprehensive scheme governing claims against the estate to support her argument.

8.1. Negotiation and Settlement of Claims

The personal representative may, before or after rejection of any claim, compromise the claim, whether due or not, absolute or contingent, liquidated, or unliquidated, if it appears to the personal representative that the compromise is in the best interests of the estate. This provision of the statute invites negotiation by the personal representative to avoid the cost of litigation. As with any lawsuit, the parties can always settle the matter. From the perspective of the personal representative, attention should be paid to documenting the benefit of settlement to the estate.

If a judgement on the claim is rendered against the personal representative, the effect of any judgment rendered against a personal representative shall be only to establish the amount of the judgment as an allowed claim. See RCW 11.40.120.

It also may be useful to note here that you might try the right of retainer doctrine. See: In Re Smith's Estate 179 Wn. 417, 38 P2d 244 (1934). Under this doctrine, the statute of limitations does not apply to the right of the estate to offset debts owed to the estate by a beneficiary. This might be useful if you have a beneficiary who is convicted of theft from the decedent.

9. Notice to creditors when personal representative resigns, dies, or is removed — Limit tolled by vacancy. – RCW 11.40.150

If a personal representative has given notice under RCW 11.40.020 and then resigns, dies, or is removed, the successor personal representative must (a) Publish notice of the vacancy and succession for two successive weeks in the legal newspaper in which notice was published under RCW 11.40.020 if the vacancy occurred within twenty-four months after the decedent's date of death; and (b) Provide actual notice of the vacancy and succession to a creditor if: (i) The creditor filed a claim and the claim had not been accepted or rejected by the prior personal representative; or (ii) the creditor's claim was rejected and the vacancy occurred within thirty days after rejection of the claim.

9.1. Extension of time for Vacancy

The time between the resignation, death, or removal and first publication of the vacancy and succession or, in the case of actual notice, the mailing of the notice of vacancy and succession must be added to the time within which a claim must be presented or a suit on a rejected claim must be filed. This section does not extend the twenty-four month self-executing bar under RCW 11.40.051.

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10. Bar Against Claims Against Decedent — RCW 11.40.051

The main reason why we want to advise our clients to follow the Statutory Claims procedure is to be able to take advantage of the statutory bar against claims against the estate. Under any circumstance, unsecured claims against a decedent are barred twenty-four months after death. This is the case whether or not notice is provided to the creditor under RCW 11.40.020. In addition, regardless of the time limits imposed by this chapter, no claim can be made by any creditor if the claim or action is already barred by an otherwise applicable statute of limitations.

From a practical standpoint, if the estate comes in your door more than 20 months after the dated of death, there is no reason to follow the Statutory Claim procedure. All claims will be barred within four months of the probate. If the client tells you there are no creditors – beware. You always want to confirm a decision not to publish notice in writing with the personal representative. Part of the purpose of publication is to provide notice to claimants that may not be readily ascertainable, even by the deceased.

It can also be noted that if you represent a creditor of an estate, and there are multiple possible defendants, then the failure to timely file a creditor’s claim only bars the collection against the decedent’s estate, not the other defendants. See Nelson v. Schnautz, et. al 2007 Wn. App. LEXIS 2927 (2007). This case was decided in the context of a malpractice lawsuit against the attorney who failed to timely file a creditor’s claim against an estate.

10.1. Time Limitations

If the personal representative provided notice under RCW 11.40.020 and the creditor was given actual notice as provided in RCW 11.40.020(1)(c), the creditor must present the claim within the later of:

a) Thirty days after the personal representative's service or mailing of notice to the creditor; and

b) Four months after the date of first publication of the notice;

If the personal representative provided notice under RCW 11.40.020 and the creditor was not given actual notice as provided in RCW 11.40.020(1)(c), then the time limitations depend on whether the creditor was reasonably ascertainable. If the creditor was not reasonably ascertainable, as defined in RCW 11.40.040, the creditor must present the claim within four months after the date of first publication of notice. If the creditor was reasonably ascertainable, as defined in RCW 11.40.040, the creditor must present the claim within twenty-four months after the decedent's date of death.

11. "Reasonably ascertainable" creditor — Definition — Reasonable diligence — Presumptions — Petition for order. RCW 11.40.040

For purposes of RCW 11.40.051, a "reasonably ascertainable" creditor of the decedent is one that the personal representative would discover upon exercise of reasonable diligence.

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The personal representative is deemed to have exercised reasonable diligence if he or she conducts a reasonable review of the decedent's correspondence, including correspondence received after the date of death, and financial records, including personal financial statements, loan documents, checkbooks, bank statements, and income tax returns, that are in the possession of or reasonably available to the personal representative.

Almost all creditors will communicate with the decedent at a minimum of every quarter. From a practical perspective, always instruct the personal representative to review all of the decedent’s mail. The personal representative should immediately instruct the post office to forward all the decedent’s mail to the personal representative’s home address or some P.O box set up for that purpose.

The personal representative should also go through the decedent’s home filings and paperwork. If the decedent was organized, then they probably have a file cabinet. Instruct the Personal Representative to go through the cabinet – tab by tab and verify there is no evidence of debt. This is also a great way to discover assets, such as life insurance, etc.

If the decedent was not organized, instruct the Personal Representative to go through the piles of papers that may be about the decedent’s residence. The Personal Representative should document this process to help gain the presumption of due diligence.

In In Re Estate of Fitzgerald, 172 Wn. App. 437, 294 P.3rd 720 (Div. 1 2012) the Court of Appeals held that the alleged creditor was not a reasonably ascertainable creditor as defined under RCW 11.40.040(2). In this case, Michael Fitzgerald dies in August 2009. The personal representative reviewed the decedent’s records in order to ascertain creditors with potential claims. The review identified one creditor, Tronox, who had litigation pending against the decedent in Nevada for alleged fraudulent conduct.

The PR published notice to creditors on October 14, 2009 and sent actual notice to Tronox. Tronox then filed a petition to substitute the PR as the defendant in the Nevada litigation and filed a creditor claim in the estate. Both the Nevada litigation and the creditor claim were dismissed with prejudice by stipulation of the parties in October 2010.

Six days later, Mountain-West, a Canadian mining company, wrote the estate to explain that it had entered into a previously undisclosed written agreement with Tronox to share in any proceeds from the Nevada litigation. The letter stated that Mountain-West was making a creditor’s claim and would file all necessary pleadings to preserve its claim.

The estate notified Mountain-West that its claims were time-barred and that the Personal Representative’s review did not reveal any other creditors other than Tronox. The estate also brought a petition under the Trust and Estate Dispute Resolution Act (“TEDRA”) requesting that the Court rule that any creditors not known to the PR prior to the February 14, 2010 four month cut-off date were not reasonably ascertainable and therefore time-barred.

Mountain-West asked the Court to continue the hearing on the TEDRA petition to allow it the opportunity to conduct discovery and specifically to depose the PR to support Mountain West’s allegation that the PR was aware of Mountain-West’s claims against the

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decedent. Mountain West also filed to creditor claims: one in the amount of $1.5 billion based on the dismissed Nevada claim and one in the amount of $150 million based on the allegations of fraudulent activity by the decedent.

The King County Superior Court commissioner denied the motion and found that the PR has conducted a reasonable review of the decedent’s records and that, based on that review, Mountain West was not a reasonably ascertainable creditor. Mountain West sought revision and the Superior Court denied the motion.

The Court of Appeals upheld the commissioner’s ruling and the Superior Court. It noted that a reasonable ascertainable creditor is a creditor that the PR would discover upon the exercise of reasonable diligence per RCW 11.40.040(3). The PR can evidence a diligent review by filing an affidavit with the court regarding the search conducted to find creditors pursuant to RCW 11.40.040(3). It went on to note that the filing of an affidavit creates a presumption of reasonable diligence and, moreover, a creditor not ascertained during this review is presumed to have not been reasonable ascertainable. This presumption can only be rebutted by clear, cogent, and convincing evidence under RCW 11.40.040(2). It should also be noted that the estate was awarded attorney fees under RCW 11.96A.150 by the Commissioner and the Superior Court, both of which were upheld on appeal. The estate was also awarded fees on appeal.

11.1. How to Gain the Presumption of Due Diligence.

If the personal representative conducts the review specified above, the personal representative is presumed to have exercised reasonable diligence to ascertain creditors of the decedent. Any creditor not ascertained in the review is presumed not reasonably ascertainable within the meaning of RCW 11.40.051. These presumptions may be rebutted only by clear, cogent, and convincing evidence creating a huge burden for the creditor. To overcome this burden the creditor could have some evidence of delivery, such as certified mail, return receipt, course of business, etc.

11.2. Always File Proof with the Court

The personal representative may evidence the review and resulting presumption by filing with the court an affidavit summarizing all the activity undertaken by the Personal Representative to discover reasonably ascertainable creditors. When closing an estate, if true, always include a sentence in the closing documents, made under the penalty of perjury, that the personal representative conducted a reasonable review of the decedent's correspondence, including correspondence received after the date of death, and financial records, including personal financial statements, loan documents, checkbooks, bank statements, and income tax returns, that are in the possession of or reasonably available to the personal representative.

The personal representative may petition the court for an order declaring that the personal representative has made a review and that any creditors not known to the personal representative are not reasonably ascertainable. The petition must be filed under RCW 11.96A.080 and the notice specified under RCW 11.96A.110 must also be given by

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publication. This last option may only be practical in extreme circumstances where the cost benefit of the extra steps lean towards having a hearing on the issue.

11.3. DSHS is Always a Reasonably Ascertainable Creditor.

Given the statutory requirement for providing actual notice to DSHS, they should always be categorized as a reasonably ascertainable creditor. As you may know, DSHS has a statutory right to recover payments made during the lifetime of a decedent under the Medicaid program. That collection right is secured by the filing of a lien against the real property owned by the decedent at the time of death. The lien is generally not filed against the property until DSHS is notified of the death.

Sooner or later you will be contacted by the beneficiary of an estate who tries to cheat DSHS out of its recovery right. One might be tempted not to let DSHS know, not open probate for two years, or a client will come to you after two years and ask you to take care of the probate and transfer the property to the client from the estate.

DSHS is barred by the 24-month period just like everyone else. However, that will not necessarily stop them from contacting the attorney general’s office and filing a claim or a complaint against the person who received the property or who probated the estate. The attorney could also get wrapped up in the action. So, instead of paying DSHS, the client gets to defend a claim for recovery or for fraud against the State of Washington. DSHS has nothing to lose by pursuing this action.

12. Non-Probate Creditor’s Claim Procedure.

As you recall from the discussion above, any asset of the decedent that was subject to satisfaction of a decedent’s general liabilities immediately before the decedent’s death are subject to creditor claims. That includes non-probate assets as well. For most purposes, the claim procedures for non-probate estate and probate estates are the same, with just some different terms and steps which are needed because of the different setting.

With the common use of living trusts, which are designed to avoid the probate process, the need for an understanding of the non-probate creditors claim procedure is critical to protecting the beneficiaries from the claims of creditors.

12.1. Notice agent — Qualifications - RCW 11.42.010

A notice agent serves the roll of the personal representative in connection with the processing of creditor claims. Appointing a notice agent is easy in most cases. Notice agents are not vested with all the powers of a personal representative, and generally you have a trustee who is well suited for the position, or a family member who wants to deal with the payment of debts and the distribution of assets but who does not need letters testamentary to distribute the estate.

In situations where no personal representative has been appointed in this state, a beneficiary or trustee who has received or is entitled to receive by reason of the decedent's

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death substantially all of the decedent's probate and nonprobate assets, is qualified to give nonprobate notice to creditors.

If no one beneficiary or trustee has received or is entitled to receive substantially all of the assets, then those persons, who in the aggregate have received or are entitled to receive substantially all of the assets, may, under an agreement under RCW 11.96A.220, appoint a person who is then qualified to give nonprobate notice to creditors under this chapter.

12.2. What if you have a group of beneficiaries?

A person or group of persons is deemed to have received substantially all of the decedent's probate and nonprobate assets if the person or the group, at the time of the filing of the declaration and oath referred to below, in reasonable good faith believed that the person or the group had received, or was entitled to receive by reason of the decedent's death, substantially all of the decedent's probate and nonprobate assets.

12.3. Qualifications of the Notice Agent.

The "notice agent" means the qualified person who:

(i) Pays a filing fee to the clerk of the superior court in a county in which probate may be commenced regarding the decedent, the "notice county", and receives a cause number; and

(ii) Files a declaration and oath with the clerk.

(b) The declaration and oath must be made in affidavit form or under penalty of perjury and must state that the person making the declaration believes in reasonable good faith that the person is qualified under this chapter to act as the notice agent and that the person will faithfully execute the duties of the notice agent as provided in this chapter.

12.4. Who is not qualified to act as a notice agent.

The following persons are not qualified to act as notice agent:

(a) Corporations, trust companies, and national banks, except: (i) Such entities as are authorized to do trust business in this state; and (ii) professional service corporations that are regularly organized under the laws of this state whose shareholder or shareholders are exclusively attorneys;

(b) Minors;

(c) Persons of unsound mind;

(d) Persons who have been convicted of a felony or of a misdemeanor involving moral turpitude; and

(e) Persons who have given notice under this chapter and who thereafter become of unsound mind or are convicted of a felony or misdemeanor involving moral turpitude. This

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disqualification does not bar another person, otherwise qualified, from acting as successor notice agent.

12.5. Non-Resident Notice Agents

A nonresident may act as notice agent if the nonresident appoints an agent who is a resident of the notice county or who is attorney of record for the notice agent upon who service of all papers may be made. The appointment must be made in writing and filed with the court.

12.6. Notice to creditors — Manner — Filings — Publication - RCW 11.42.020

In addition to the requirements set forth above, the notice agent must adhere to the following:

(a) As of the date of the filing of the notice to creditors with the court, the notice agent has no knowledge of another person acting as notice agent or of the appointment of a personal representative in the decedent's estate in the state of Washington; and

(b) According to the records of the court as are available on the date of the filing of the notice to creditors, no cause number regarding the decedent has been issued to any other notice agent and no personal representative of the decedent's estate had been appointed.

Beyond the requirements set forth above, the notice agent must give notice to the creditors of the decedent, in substantially the form set forth in RCW 11.42.030, announcing that the notice agent has elected to give nonprobate notice to creditors and requiring that persons having claims against the decedent present their claims within the time specified in RCW 11.42.050 or be forever barred as to claims against the decedent's probate and nonprobate assets. A copy of the form is attached as Exhibit E.

(a) The notice agent shall file the notice with the court.

(b) The notice agent shall cause the notice to be published once each week for three successive weeks in a legal newspaper in the notice county.

(c) The notice agent may at any time give actual notice to creditors who become known to the notice agent by serving the notice on the creditor or mailing the notice to the creditor at the creditor's last known address, by regular first class mail, postage prepaid.

(d) The notice agent shall also mail a copy of the notice, including the decedent's social security number, to the state of Washington department of social and health services' office of financial recovery.

(e) If the decedent was a resident of the state of Washington at the time of death and the notice agent's declaration and oath were filed in a county other than the county of the decedent's residence, then instead of the requirements in (a) and (b) of this subsection, the notice agent shall cause the notice to creditors in substantially the form set forth in RCW 11.42.030 to be published once each week for three successive weeks in a legal newspaper in

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the county of the decedent's residence and shall file the notice with the superior court of the county in which the notice agent's declaration and oath were filed.

The notice agent shall file with the court proof by affidavit of the giving and publication of the notice.

12.7. Claims — Duty to allow or reject — Notice of petition to allow — Attorneys' fees – RCW 11.42.080

As with a person representative, the notice agent may allow or reject a claim, in whole or in part. If the notice agent fails to notify, then the claimant may serve written notice on the notice agent that the claimant will petition the court to have the claim allowed. If the notice agent fails to notify the claimant of the allowance or rejection of the claim within twenty days after the notice agent's receipt of the claimant's notice, the claimant may petition the court for a hearing to determine whether the claim should be allowed or rejected, in whole or in part. If the court substantially allows the claim, the court may allow the petitioner reasonable attorneys' fees chargeable against the decedent's assets received by the notice agent or by those appointing the notice agent.

12.8. Property liable for claims — Payment limits - RCW 11.42.085

The decedent's nonprobate and probate assets that were subject to the satisfaction of the decedent's general liabilities immediately before the decedent's death are liable for claims. The decedent's probate assets may be liable, whether or not there is a probate administration of the decedent's estate.

The notice agent may pay a claim allowed by the notice agent or a judgment on a claim first prosecuted against a notice agent only out of assets received as a result of the death of the decedent by the notice agent or by those appointing the notice agent, except as may be provided by agreement under RCW 11.96A.220 or by court order issued in a judicial proceeding under RCW 11.96A.080. If the notice agent was appointed through the use of a binding agreement under RCW 11.96A.220, then the agreement should provide how the notice agent should respond to claims. Otherwise, the notice agent will have to petition the court for contribution from the other beneficiaries.

12.9. Allowance of claims — Notice — Payment order - RCW 11.42.090

If the notice agent allows a claim, the notice agent shall notify the claimant of the allowance by personal service or regular first class mail to the address stated on the claim. A claim may not be allowed if it is barred by a statute of limitations.

(2) The notice agent shall pay claims allowed in the following order from the assets of the decedent that are subject to the payment of claims as provided in RCW 11.42.085:

(a) Costs of administering the assets subject to the payment of claims, including a reasonable fee to the notice agent, any resident agent for the notice agent, reasonable attorneys'

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fees for the attorney for each of them, filing fees, publication costs, mailing costs, and similar costs and fees;

(b) Funeral expenses in a reasonable amount;

(c) Expenses of the last sickness in a reasonable amount;

(d) Wages due for labor performed within sixty days immediately preceding the death of the decedent;

(e) Debts having preference by the laws of the United States;

(f) Taxes, debts, or dues owing to the state;

(g) Judgments rendered against the decedent in the decedent's lifetime that are liens upon real estate on which executions might have been issued at the time of the death of the decedent and debts secured by mortgages in the order of their priority; and

(h) All other demands against the assets subject to the payment of claims.

The notice agent may not pay a claim of the notice agent or other person who has received property by reason of the decedent's death unless all other claims that have been filed under this chapter, and all debts having priority to the claim, are paid in full or otherwise settled by agreement, regardless of whether the other claims are allowed or rejected.

12.10. Rejection of claim — Time limits — Notice — Time limit for suit — Compromise of claim. - 11.42.100

If the notice agent rejects a claim, in whole or in part, the claimant must bring suit against the notice agent within thirty days after notification of rejection or the claim is forever barred. The notice agent shall notify the claimant of the rejection and file an affidavit with the court showing the notification and the date of the notification. The notice agent shall notify the claimant of the rejection by personal service or certified mail addressed to the claimant or claimant's agent, if applicable, at the address stated in the claim. The date of service or of the postmark is the date of notification. The notification must advise the claimant that the claimant must bring suit in the proper court against the notice agent within thirty days after notification of rejection or the claim will be forever barred.

If a claimant brings suit against the notice agent on a rejected claim and the notice agent has not received substantially all assets of the decedent that are liable for claims, the notice agent may only make an appearance in the action and may not answer the action but must cause a petition to be filed for the appointment of a personal representative within thirty days after service of the creditor's action on the notice agent. Under these circumstances, a judgment may not be entered in an action brought by a creditor against the notice agent earlier than twenty days after the personal representative has been substituted in that action for the notice agent.

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The notice agent may, before or after rejection of any claim, compromise the claim, whether due or not, absolute or contingent, liquidated, or unliquidated.

12.11. Effect of judgment against notice agent – 11.42.110

The effect of a judgment rendered against the notice agent shall be only to establish the amount of the judgment as an allowed claim.

12.12. Notice to creditors when notice agent resigns, dies, or is removed — Limit tolled by vacancy - 11.42.140

If a notice agent has given notice under RCW 11.42.020 and the notice agent resigns, dies, or is removed or a personal representative is appointed, the successor notice agent or the personal representative shall:

(a) Publish notice of the vacancy and succession for two successive weeks in the legal newspaper in which notice was published under RCW 11.42.020, if the vacancy occurred within twenty-four months after the decedent's date of death; and

(b) Provide actual notice of the vacancy and succession to a creditor if: (i) The creditor filed a claim and the claim had not been allowed or rejected by the prior notice agent; or (ii) the creditor's claim was rejected and the vacancy occurred within thirty days after rejection of the claim.

The time between the resignation, death, or removal of the notice agent or appointment of a personal representative and the first publication of the vacancy and succession or, in the case of actual notice, the mailing of the notice of vacancy and succession must be added to the time within which a claim must be presented or a suit on a rejected claim must be filed. This section does not extend the twenty-four-month self-executing bar under RCW 11.42.050.

12.13. Appointment of personal representative — Cessation of notice agent powers and authority — Notice not affected — Personal representative's powers — Petition for reimbursement for allowance and payment of claims by notice agent - 11.42.150

The powers and authority of a notice agent immediately cease, and the office of notice agent becomes vacant, upon appointment of a personal representative for the estate of the decedent. Except as provided in RCW 11.42.140(2), the cessation of the powers and authority does not affect the filing and publication of notice to creditors and does not affect actual notice to creditors given by the notice agent.

As set forth in RCW 11.40.160, a personal representative may adopt, ratify, nullify, or reject any actions of the notice agent.

If a personal representative is appointed and the personal representative does not nullify the allowance of a claim that the notice agent allowed and paid, the person or persons

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whose assets were used to pay the claim may petition for reimbursement from the estate to the extent the payment was not in accordance with chapter 11.10 RCW.

12.14. Personal representative as successor to notice agent — Notice not affected — Presumptions — Duties. 11.40.160

If a notice agent had commenced nonprobate notice to creditors under chapter 11.42 RCW, the appointment of the personal representative does not affect the filing and publication of notice to creditors and does not affect actual notice to creditors given by the notice agent. The personal representative is presumed to have adopted or ratified all acts of the notice agent unless, within thirty days of appointment, the personal representative provides notice of rejection or nullification to the affected claimant or claimants by personal service or certified mail addressed to the claimant or claimant's agent, if applicable, at the address stated on the claim. The personal representative shall also provide notice under RCW 11.42.150.

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TABLE OF CONTENTS

1. Introduction .................................................................................................................... 1

2. Which Claims Come under the Statutory Claims Procedure? ....................................... 1

2.1 Administrative Expenses Are Not Subject to the Bar .................................. 1

2.2 Certain Ownership Agreements – Joint Property ......................................... 2

2.3 Claims that May be Offse ............................................................................. 2

2.4 Secured Creditors ......................................................................................... 2

2.5 Specific Performance ................................................................................... 2

2.6 Leases ........................................................................................................... 2

2.7 Claims Covered by Insurance ....................................................................... 4

2.8 What if the personal representative is also a creditor of the estate? ............. 4

2.9 What if a decedent was a defendant in a lawsuit at the time of his or her death? ................................................................................................................................ 5

2.10 Community Property Claims ....................................................................... 5

2.11 Preexisting Judgments ................................................................................. 5

3. What Assets are Subject to Creditor’s Claims? ............................................................. 6

3.1 Generally ...................................................................................................... 6

3.2 Not all Non-Probate Assets are Non-Probate Assets ................................... 6

3.3 Abatement .................................................................................................... 6

4. Basic Procedural Requirements for Giving Notice to Creditors .................................... 7

4.1. Actual Notice to Creditors ...................................................................................... 8

4.2 When should you Mail Actual Notice to Creditors? ................................................ 9

5. Claims — Form — Manner of presentation — Waiver of defects. RCW 11.40.070 .... 9

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6. Claims — Duty to allow or reject — Notice of petition to allow — Attorneys' fees – RCW 11.40.080 .................................................................................................... 11

6.1 Time Limits to Allow or Reject ............................................................................. 11

6.2 Potential for Award of Attorney Fees if Claim is not Properly Accepted or Rejected ......................................................................................................... 11

7. Allowance of claims — Notice — Automatic allowance — Petition for extension — Ranking of claims — Barred claims – RCW 11.40.090 ...................................... 12

7.1 Claims Not Exceeding $1,000.00 Will be Deemed Allowed * ............................. 12

7.2 Document the Treatment of the Claim – and Communicate with the Creditor ..... 12

7.3 Can the Personal Representative Just Pay a Claim? .............................................. 12

8. Rejection of claim — Time limits — Notice — Compromise of claim – RCW 11.40.100 .............................................................................................................. 13

8.1 Negotiation and Settlement of Claims ................................................................... 15

9. Notice to creditors when personal representative resigns, dies, or is removed — Limit tolled by vacancy ........................................................................................ 15

9.1 Extension of time for Vacancy .............................................................................. 15

10. Bar Against Claims Against Decedent ......................................................................... 16

10.1 Time Limitations ................................................................................................... 16

11. Reasonably ascertainable ............................................................................................. 16

11.1. How to Gain the Presumption of Due Diligence ................................................. 18

11.2 Always File Proof with the Court ......................................................................... 18

11.3 DSHS is Always a Reasonably Ascertainable Creditor ......................................... 19

12. Non-Probate Creditor’s Claim Procedure .................................................................... 19

12.1 Notice agent — Qualifications - RCW 11.42.010 ............................................... 19

12.2 What if you have a group of beneficiaries? .......................................................... 20

12.3 Qualifications of the Notice Agent ....................................................................... 20

12.4 Who is not qualified to act as a notice agent ........................................................ 20

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12.5 Non-Resident Notice Agents ................................................................................ 21

12.6 Notice to creditors — Manner — Filings — Publication - RCW 11.42.020....... 21

12.7 Claims — Duty to allow or reject — Notice of petition to allow — Attorneys' fees – RCW 11.42.080 .......................................................................................... 22

12.8 Property liable for claims — Payment limits - RCW 11.42.085 ........................ 22

12.9 Allowance of claims — Notice — Payment order - RCW 11.42.090 ............... 22

12.10 Rejection of claim — Time limits — Notice — Time limit for suit — Compromise of claim. - 11.42.100 ....................................................................... 23

12.11 Effect of judgment against notice agent – 11.42.110 ........................................ 24

12.12 Notice to creditors when notice agent resigns, dies, or is removed — Limit tolled by vacancy .................................................................................................. 24

12.13 Appointment of personal representative — Cessation of notice agent powers and authority — Notice not affected — Personal representative's powers — Petition for reimbursement for allowance and payment of claims by notice

agent - 11.42.150 .................................................................................................. 24

12.14 Personal representative as successor to notice agent — Notice not affected — Presumptions — Duties. 11.40.160 ...................................................................... 25

PROBATE NOTICE TO CREDITORS -1- G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex A.doc

EXHIBIT A

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR * COUNTY In re Estate of * Deceased.

NO. * PROBATE NOTICE TO CREDITORS RCW 11.40.030

The undersigned has been appointed and has qualified as * of this estate. Any person

having a claim against the decedent must, before the time the claim would be barred by any

otherwise applicable statute of limitations, present the claim in the manner as provided in RCW

11.40.070 by serving on or mailing to the undersigned * or the *’s attorneys of record at the

address stated below a copy of the claim and filing the original of the claim with the court in

which the probate proceedings were commenced. The claim must be presented within the later

of: (1) thirty days after the * served or mailed the notice to the creditor as provided under RCW

11.40.020(1)(c); or (2) four months after the date of first publication of the notice. If the claim is

not presented within this time frame, the claim is forever barred, except as otherwise provided in

PROBATE NOTICE TO CREDITORS -2- G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex A.doc

RCW 11.40.051 and 11.40.060. This bar is effective as to claims against both the probate assets

and nonprobate assets of the decedent.

Date of first publication: ______________

* *

Presented by: AIKEN, ST. LOUIS & SILJEG, P.S. By:

*, WSBA No.: * Attorneys for the Estate

Address for Mailing or Service: Estate of * C/o *[atty] Aiken St. Louis & Siljeg, P.S. 801 Second Ave., Suite 1200 Seattle, WA 98104 Court of probate proceedings: * County Superior Court Cause No. *

CREDITORS CLAIM -1- G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex B.doc

EXHIBIT B

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR * COUNTY In re Estate of * Deceased.

NO. * CREDITORS CLAIM

*, as claimant, whose address is *, makes claim against the above named deceased person in the amount of $*.

This claim is based upon the following facts and circumstances: *.

This claim is due *.

DATED this day of *, 200*.

Claimant By: (Nature of authority) Business address

ACCEPTANCE OF CREDITOR’S CLAIM G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex C.doc

EXHIBIT C

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR * COUNTY In re Estate of * Deceased.

NO. * ACCEPTANCE OF CREDITORS CLAIM

The attached creditors claim of *, in the amount of $* is accepted.

DATED this day of , 200*.

* * of the Estate of *

NOTICE OF REJECTION OF CLAIM G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex D.doc

EXHIBIT D

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR * COUNTY In re Estate of * Deceased.

NO. * NOTICE OF REJECTION OF CLAIM RCW 11.40.100

TO: *, Claimant AND TO: *, Attorney for Claimant The undersigned * of the Estate of * rejects the claim filed by *, in the amount of $*.

Claimant must bring suit in the proper court against the * within thirty days after notification of

rejection or before expiration of the time for serving and filing claims against the estate,

whichever period is longer; otherwise the claim will be forever barred. The date of postmark is

the date of notification by mail.

DATED this _____ day of , 200*.

____________________________ *, Executor Estate of *

Presented by: AIKEN, ST. LOUIS & SILJEG, P.S. By: * Attorneys for the Estate

PROBATE NOTICE TO CREDITORS -1- G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex E.doc

EXHIBIT E

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON

IN AND FOR * COUNTY In re Estate of * Deceased.

NO. * NON-PROBATE NOTICE TO CREDITORS RCW 11.42.030

The notice agent named below has elected to give notice to creditors of the above-named

decedent. As of the date of the filing of a copy of this notice with the court, the notice agent has

no knowledge of any other person acting as notice agent or of the appointment of a personal

representative of the decedent's estate in the state of Washington. According to the records of the

court as are available on the date of the filing of this notice with the court, a cause number

regarding the decedent has not been issued to any other notice agent and a personal

representative of the decedent's estate has not been appointed.

Any person having a claim against the decedent must, before the time the claim would be barred

by any otherwise applicable statute of limitations, present the claim in the manner as provided in

PROBATE NOTICE TO CREDITORS -2- G:\CLE Department\2014 2015 PROGRAMS\11 13 14 Probate Administration\Faculty and Materials\Vohr, Mark\Creditor Claims Ex E.doc

RCW 11.42.070 by serving on or mailing to the notice agent or the notice agent's attorney at the

address stated below a copy of the claim and filing the original of the claim with the court in

which the notice agent's declaration and oath were filed. The claim must be presented within the

later of: (1) Thirty days after the notice agent served or mailed the notice to the creditor as

provided under RCW 11.42.020(2)(c); or (2) four months after the date of first publication of the

notice. If the claim is not presented within this time frame, the claim is forever barred, except as

otherwise provided in RCW 11.42.050 and 11.42.060. This bar is effective as to claims against

both the decedent's probate and nonprobate assets.

Date of first publication: ______________

Printed Name Notice Agent

Presented by: AIKEN, ST. LOUIS & SILJEG, P.S. By:

*, WSBA No.: * Attorneys for the Notice Agent

Address for Mailing or Service: Estate of * C/o *[atty] Aiken St. Louis & Siljeg, P.S. 801 Second Ave., Suite 1200 Seattle, WA 98104 Court of Notice Agent's oath and declaration and cause number:

Declaration of Mailing of Probate Notice to Creditors to WDSHS RCW 11.40.020(1)(d) Page 1 of 1

Your Name, Address, & Phone

EXHIBIT F

SUPERIOR COURT OF WASHINGTON FOR KING COUNTY

Estate of

GEORGE WASHINGTON, Deceased.

NO. DECLARATION OF MAILING OF PROBATE NOTICE TO CREDITORS TO WDSHS (RCW 11.40.020(1)(d))

In accordance with RCW 9A.72.085, I declare under penalty of perjury under the laws of the State of Washington that on the date written below, I added Decedent’s Social Security Number to a true and correct copy of the Probate Notice to Creditors filed in these proceedings, and mailed by first-class mail of the US Postal Service, postage prepaid, that copy to:

Office of Financial Recovery

Washington Department of Social and Health Services PO Box 9501

Olympia, WA 98507-9501 SIGNED On July 4, 2003 At Seattle, WA ________________________________ Your Name, Personal Representative