Creditor as Administrator

As this letter shows, John D. Washington of Richmond, Indiana has really worked himself into a lather over Indiana's Probate Code.  More specifically, Mr. Washington has a problem with the idea that a debtor [sic - I assume he means creditor] of a decedent may petition the court to be named as administrator of the decedent's estate.  A similar law applies in Illinois (see §9-3 of the Illinois Probate Act (755 ILCS 5/9=3)).

According to Mr. Washington, "[a]fter reading all 20 chapters of Title 29, Article 1 [Indiana's Probate Code], I challenge any attorney or any judge to show the Indiana legislature intended for any Tom, Dick or Harry debtor to use IC 29-1-7-7 to get Letters of Administration and raid an estate."  While I am not an Indiana attorney, I think I'm up to the challenge - let's see how I do.

First of all, the goal of probate administration is the orderly wrapping up of the decedent's affairs.  This is usually accomplished by an executor (if the decedent named one in his or her Will) or an administrator (if the decedent didn't name one or didn't have a Will), working together with a judge via the probate process. 

Probate basically consists of four steps:

1. Locating and collecting the decedent's assets.

2. Compiling a list of the decedent's debts.

3. Paying the decedent's debts (and expenses of administration).

4. Distributing the rest of the decedent's assets as per the decedent's Will (or, if there is no Will, pursuant to the applicable intestacy law).

As the above indicates, there's an order at work here, which is what prevents the possibility of a "raid" by a creditor (or anyone else), or the use of a "first come, first served" regime.  For instance, in Illinois, the executor or administrator must give actual notice to all known creditors AND publish a newspaper notice for unknown/potential creditors.  This gives all creditors the chance to file a claim against the estate, in order to prevent their claim from being barred.  If the value of all claims exceeds the value of the estate, the Illinois Probate Act classifies which claims are to be paid first, in a manner similar to that used in bankruptcy.

Mr. Washington is concerned that "any judge in the state of Indiana... makes a will worthless when they allow a debtor" to become the administrator of an estate.  Yet I'm not sure that Mr. Washington understands why a creditor might wish to become appointed as administrator of an estate, or even how a creditor gets appointed. 

First of all, note that we are talking about an administrator -- if the decedent had a valid Will, and that Will named an executor who meets the statutory requirements to act (not a felon, a US citizen, etc.), then the named executor can petition the court for appointment.  And the court undoubtedly will appoint him or her. 

But what if John Smith dies without a Will, with a credit card debt of $100,000?  The credit card company wants to collect their money, but no one comes forward to open an estate for Mr. Smith.  At that point, Illinois law (and, presumably, Indiana law) allows the credit card company to petition the court to be named as administrator, so its claim for money owed -- which should and does survive Mr. Smith's passing -- does not disappear.  (Actually, in Illinois, there is a priority list of who may act as -- or nominate someone to act as --administrator.  The decedent's surviving spouse is at the top of that list.  Creditors are at the bottom, meaning that they may only act if no one else does.)

May the credit card company/administrator "raid" the decedent's estate?  It may not.  The credit card company/administrator must follow the rules -- and fulfill the fiduciary duties -- applicable to all administrators under the probate law.  If there are other creditors, they must receive the correct notice; assets must be collected; debts and expenses must be paid following the statutory scheme; and any assets then remaining must be distributed to the estate beneficiaries.  In all events, the administrator is accountable to the judge overseeing the probate.

Wrapping up a deceased person's affairs is often a dirty job, but somebody has to do it.  Allowing creditors to act as administrator when no one else comes forward to act isn't "unconstitutional" or even bad public policy -- rather, it's good sense, and helps promote the efficient administration of estates.