What happens if you hold a promissary note from a person who dies?

If the person dies, you would have to make a claim against his estate. Look at the promissory note, typically, it is an event of default for the borrower to die. Suits against an estate must be brought, I think, within one year. To protect your interests now, try to have the borrower agree to mortgage certain property or find someone else to personally guarantee it.

Attorney Harrington is correct that you have one year to file a claim against an estate. Assuming that the estate has any assets, you should file a notice in the probate file of the claim against the estate, file a complaint in the appropriate district or superior court (district if the amount owed is less than $25,000, superior if it is more than $25,000) and then file a copy of the complaint in the probate file.

As for protecting yourself against such a contingency in advance, if you can get someone to sign a written guaranty to pay the note in the event the promisor dies, that would provide you some security. Make sure any such guaranty is in writing, as oral promises to pay the debt of another is barred by the Statute of Frauds.

Hope this was helpful.