What happens when someone dies with insufficient assets to
pay his or her creditors? What if the deceased had bank accounts in joint tenancy, or gave a family member a deed to his house effective on death—thus transferring assets without need of a probate proceeding?
It used to be that creditors could not make a claim against such assets; they were limited to estate assets, or if the decedent had created a revocable trust during his lifetime, to assets of the trust. However, if the decedent titled his property in joint tenancy, so that at his death, the property would be transferred to the other joint tenant by operation of law, creditors were out of luck: there was no way to reach such an asset.
The good news for creditors is that the Nevada legislature has recently passed
legislation designed to fix this problem. If an estate has insufficient assets
to satisfy the creditors’ claims made against it, the new law will allow
creditors to recover from those who receive assets outside of probate. In other
words, if Dad left you $15,000 in a joint bank account, you cannot take his
name off the account and go spend the money, if he left unpaid medical bills
that his estate cannot pay. Either the personal representative of the estate,
or the creditor himself, can initiate a proceeding designed to recover the debt
from the proceeds in the joint account.
The new legislation goes into effect October 1, 2011. If you need assistance with this issue, you should contact a qualified Nevada probate attorney.