Change In Kentucky Probate Law Has Implications In Creditor/Debtor Relationship

Effective July 30, 2020, the process in Kentucky changed as to the procedure for asserting a claim against a decedent’s estate. The change has ramifications for banks and others who are owed money.

Kentucky formerly mandated that any claim (whether due or to become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort, or other legal basis) be asserted against an estate within six (6) months after the appointment of the personal representative, or where no personal representative has been appointed, within two (2) years after the decedent's death. This generally provided ample time for a creditor to assert a claim if required.

This process was modified to require the assertion of a claim within eight (8) months after the decedent's death, whether an estate has been opened or not. This time frame can be further accelerated in two ways: (1) upon the appointment of a personal representative, the clerk of the probate court shall publish notice to creditors, giving the creditors six (6) months from appointment of the personal representative to file a claim; or, (2) upon the personal representative giving actual notice in writing by mail or other delivery to a creditor, notifying the creditor to present his or her claim within sixty (60) days after the mailing or other delivery of the notice.

It is this second exception that could prove problematic. Creditors need to be diligent in terms of both a process to receive and review notices sent in accordance with the statute and to assert a claim within the sixty day time frame if necessary. The failure to act within any of these deadlines is an absolute bar on the assertion of a claim against the estate.

The statute makes clear that whether or not a claim is asserted, the deadlines stated do not affect or prevent, to the extent of the security only, any proceeding to enforce any mortgage, pledge, lien or other security interest securing an obligation of the decedent or upon property of the estate. Therefore, the collateral underlying an obligation is not at risk, but preserving recourse to the estate of an obligor/guarantor does require prompt action.