Probate Collections for Credit Unions

By Stuart A. Best, Partner

Probate Collections require special care over and above following the law to make sure that proper respect is given to the grieving family.  Although probate collections is obtaining payment from a deceased estate, there are many statutory protections for the family to assure that funds set aside for the family are protected from creditors,  yet allowing the lender to collect, either funds which are due to them from the deceased borrower’s estate, or to obtain their collateral. With the average age of Americans advancing, and the baby boomers moving closer to their “Golden” age, probate collections is a fast growing tool for lenders which cannot be overlooked.  If performed compassionately and within the bounds of the processes and procedures set up in most states, however, probate collections can be a sound source for the collection of receivables, while protecting the reputation and integrity of the Credit Union.

In most states there are “widows” elections and or “family allowances” which are statutory protections that provide the family of the deceased a high priority claim as to the deceased’s funds. These claims are calculated after cost of administration of the estate and taxes, and yet before any claims of creditors or heirs/devisees of the estate. These elections and or allowances are calculated on the value of the entire estate, which many times does not include: excluded assets such as real property which was deeded jointly, or “by the entireties” with a spouse, life insurance proceeds, 401(k) benefits for which a beneficiary was listed, to name a few. These assets pass outside of probate and are not subject to the claims of creditors.

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