Who Gets Paid First Out of a Deceased's Estate?

By River Braun, J.D.

Who Gets Paid First Out of a Deceased's Estate?

By River Braun, J.D.

When someone passes away, their estate's assets must be secured and distributed according to their will or state intestate laws. However, another important function of the estate is to pay the deceased's debts. If an estate has sufficient assets to pay all debts, the administrator can pay what is owed in any order. If the estate does not have sufficient funds to pay all debts, state laws specify the order of priority for debts.

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Read on to learn about this prioritized order to determine which debts should get paid first.

Priority for Debt Payment from an Estate

Each state has probate laws that direct how a person's final affairs are handled. Probate laws cover everything from opening a probate estate, appointing a person to administer the estate, identifying heirs, distributing property, and paying debts. In most cases, an estate has enough money and assets to pay all debts, so prioritizing debts is not an issue. However, when an estate lacks sufficient money to pay what is owed, the estate administrator must carefully follow state law to determine who to pay first.

While laws vary slightly, many states use the following order of priority for estate debts.

  1. Administrative costs. The costs of administering the estate are given first priority. Common costs include court fees, the administrator's commission, filing fees, notice costs, and attorney's fees.
  2. Family exemptions. Many states provide for payments to help family members pay living expenses while the estate is being probated. The family exemption is typically given a high priority so that families do not experience financial stress on top of mourning the loss of their loved ones.
  3. Funeral and burial costs. Allowable expenses may be capped for funeral and burial costs by state law. In most cases, you can pay for costs related to cremation, interment, markers, urns, and costs associated with the funeral service.
  4. Government debts. Debts such as property taxes, income taxes, and estate taxes take priority over other obligations.
  5. Final medical bills. The medical costs for the deceased's final sickness or injury are given priority over other unsecured debts.
  6. All other claims. Most states do not prioritize other general unsecured debts. In some cases, debts may be paid based on the filing date of the claim or debts may be prorated.

Some states shift the priority of the family exemptions and funeral costs. Final medical bills and estate taxes may also receive different priority based on state law.

Assistance for Estate Administrators

If you are serving as an estate administrator and are uncertain about which debts should get paid first, you can research state laws, talk to the probate court, or work with an attorney. Before you pay any debts, ensure that you check the validity of the claim. You may have bills for some debts, however, creditors should file claims with the estate. If you are unsure whether or not the deceased owed the debt, you can request that a creditor provide sufficient proof of the claimYou may also want to verify that the deceased did not have insurance to pay their debts, such as insurance that pays a mortgage or car loan upon death. Also, some debts, such as loans on real estate and vehicles, typically become the heir's responsibility once they inherit the property. The most important step is to ensure you understand the state laws related to the priority of debts. Seeking experienced assistance may be necessary for large or complex estates.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.