In the instance where a decedent has recently passed away and had either been hospitalized or under medical care there can be a significant delay in receiving medical bills.
It's important to provide enough time for all bills to come in. In some cases the decedent may have been covered under VA benefits and final medical costs are anticipated to be low or non-existent.
In other cases it is vital to understand the type of medical coverage the decedent had on the date of death.
Medicare versus Medicaid...What's the Difference?
Medicare is a federal program that provides health coverage if you are 65 or older or have a severe disability, no matter your income. Medicaid is a state and federal program that provides health coverage if the insured qualifies on the basis of lower income.
Unlike Medicare which often is accompanied with a privately purchased supplement, Medicaid benefits paid out after the age of 55 are recoverable as claims against the estate.
Under the Florida Medicaid Estate Recovery Program, if a decedent was covered under Medicaid it is important to be aware of the potential for Medicaid to make a claim as a creditor against the estate for reimbursement of benefits paid out for the decedent’s medical care at age 55 and over. Non-exempt estate assets may be used to satisfy these claims.
Medicaid may not seek to recover the debt if they receive adequate proof that the deceased recipient was survived by a spouse, a minor child (under 21), or a child who has been determined by the Social Security Administration to be blind or permanently and totally disabled.
Before opening probate, when a decedent was covered under Medicaid we recommend the heirs contact the Medicaid office of the decedent's domicile state to determine if Medicaid is owed.
In Florida, the statewide Medicaid office can be reached at 877-357-3268.
Relevant statutes are here:
Florida Statutes Section 409.9101 – Recovery for payments made on behalf of Medicaid-eligible persons
Florida Statutes Section 733.2121– Notice to creditors; filing of claims
Florida Statutes Section 733.707 – Order of payment of expenses and obligations
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The first thing to recognize is that unless a family member was a signatory to the debt (actually signed on as an original borrower or guarantor of the debt) there is no obligation on the part of any family member to pay the decedent's debts.
DO NOT be intimidated by creditors attempting to collect against the estate.
Under Florida law there are formal probate procedures for collecting debts and creditors should be familiar with the process. If you feel you are being pressured or harassed for payment by the decedent's creditors you should speak with a Florida probate attorney as soon as possible.
During probate, creditors have a right to be notified that a borrower has passed away, and in the probate process known creditors are (more on this in a moment), but creditors do not have a right to demand payment from someone not legally obligated, either before or during the probate process.
If the option exists to conduct either a Summary or Formal probate, one important factor to consider is minimizing the time period in which creditors can file claims.
This can be accomplished by publishing a Notice to Creditors which in effect tells the world that 90 days from the date of the notice's publication, all creditors who haven't filed a claim against the estate will be barred forever from doing so.
IMPORTANT: This does not apply to mortgages, secured loans, properly filed liens or creditors who could have been found after a diligent search.
Finally, one little known fact is that two years from the date of death of a decedent, creditors claims against the estate are barred.
In other words, these claims fall away and are not enforceable (mortgages, secured loans and perfected liens are exceptions).
There are beneficiaries of an estate who, upon review of the amount owed to creditors, have determined that they are going to wait until two years from the decedent's death before probating the estate. In this way many outstanding debts are barred from collection.
The decision to pay creditors involves several considerations, the first and foremost of which is whether there are funds available in the estate to do so.
Certain assets, including the decedent's homestead, cars regularly used by the decedent, and up to $20,000 in household furniture, furnishings, and appliances and certain qualified tuition programs are exempt from unsecured creditor's claims. If there is little else in the estate, odds are no creditors will end up being paid.
You need a clear understanding of who is owed by the estate before initiating probate and you should discuss the debts with a probate attorney to gain a full understanding of the options available.
For a more detailed discussion of creditors claims in probate see Chapter 733 of the Florida Statutes (here)
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One of the primary purposes of probate is to ensure that the decedent’s debts are paid in an orderly fashion. The personal representative must use diligent efforts to give actual notice of the probate proceeding to "known or reasonably ascertainable" creditors.
This gives the creditors an opportunity to file claims in the decedent’s probate estate, if any. Creditors who receive notice of the probate administration are given a time limit to file a claim with the clerk of the circuit court.
The personal representative, or any other interested persons, may file an objection to the Statement of Claim. If an objection is filed, the creditor must file a separate independent lawsuit to pursue the claim. A claimant who files a claim in the probate proceeding must be treated fairly as a person interested in the probate estate until the claim has been paid, or until the claim is determined to be invalid.
The legitimate debts of the decedent, specifically including proper claims, taxes, and expenses of the administration of the decedent’s probate estate, must be paid before making distributions to the decedent’s beneficiaries. The court will require the personal representative to file a report to advise of any claims filed in the probate estate, and will not permit the probate estate to be closed unless those claims have been paid or otherwise disposed of.
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An Important Note Regarding Medical Bills
"Should I pay the bills?"