Review payment priority order
After all assets have been collected and inventoried, it’s time to pay outstanding bills, debt, and taxes of the deceased.
Do not pay every bill as it arrives; some bills and debt are more of a priority than others, and state law typically dictates that an estate’s debts are paid in a particular order.
While every state has its own priority order for payments of the deceased’s estate debts, they are typically prioritized in a certain way.
For instance, costs associated with administering the estate and funeral expenses are typically paid before other expenses like credit card debt.
How do most states prioritize payment of the deceased’s debts?
Every state has their own laws outlining which debts of the deceased are to be paid before others.
It is important to review the laws of the state where the deceased lived to determine the priority of payments, because the priority varies from state-to-state.
However, most states typically prioritize the payment of debts in the following order:
- Costs of administering the estate - expenses related to administering the estate as well as management of the estate’s property, such as court fees, attorney fees, and real estate costs
- Payments to surviving family - payments needed for the ongoing support of the deceased’s dependents, such as their spouse, children, or elderly parents
- Funeral expenses - products and services purchased for funeral or memorial services, including burial and cremation costs
- Government expenses - outstanding debt owed to the state or federal government, including back taxes, interest, or penalties
- High priority creditors - secured loans to creditors, such as a mortgage, car payment, or business loan
- Medical expenses - costs related to the medical support of the deceased, such as hospital charges or hospice care
- General bills, debt, and expenses - additional unsecured debt the deceased may have had, such as credit card payments or payday loans
What if the Estate does not have enough money to pay all its bills and debt?
If the estate does not have enough money or assets to pay its bills and debts, it is considered “insolvent.”
If the estate cannot pay its bills and debts, the executor or administrator will have to ask the probate court to declare the estate officially insolvent.
The procedure for declaring an estate insolvent varies by state, but usually involves filing specific paperwork with the probate court, such as a financial accounting that shows the estate is unable to pay its debts.
The executor or administrator may have to enlist the assistance of a probate attorney, as this process can be complicated. However, attorneys are not legally required.
Once the probate court determines that an estate is “insolvent,” the court will specify the priority of payments.
The probate court will require the estate to pay off as much debt as possible, in a certain order.
Read More To learn more about “insolvent” estates, see the determine estate solvency” section of the Guide.
Providers to Contact
Probate Attorneys Near You
Probate attorneys help settle a deceased person’s estate. They can help you pay the estate's debts and determine whether the estate is insolvent and file necessary petitions with the probate court.