One of an executor’s most important probate jobs is to pay bills left by the decedent. She must settle all debts before transferring real estate or anything else to the beneficiaries. This ensures that the estate has sufficient funds to pay everyone owed. Most states prioritize the order in which these bills are paid, and the decedent’s medical expenses are usually high on the list -- at least if they’re associated with his final illness. Beneficiaries do not have to pay these bills themselves. The money comes out of estate funds.
If the decedent maintained health insurance or had Medicare coverage, his medical bills might be insignificant in any event. When an executor pays the decedent’s medical bills “first” before paying other debts, this usually does not mean she writes a check from the estate’s bank account immediately. It means that health care providers receive their money before other creditors receive payment. Most executors will submit the decedent's medical bills to any available insurance coverage first to determine the balance for which the estate is responsible, if any.
If the decedent didn’t manage his estate well and neglected to leave cash assets with which to pay his debts, the courts in most states empower the executor to sell the estate’s tangible assets and real estate to raise the money. Many individuals will maintain at least a small life insurance policy, payable to the estate, so funds are available to avoid this. However, in the absence of such a safeguard, the executor might petition the court to allow her to sell the home meant for you so she can pay the decedent’s medical expenses and other bills. You would not have to sell the home yourself, but the executor might have to liquidate it before it ever reaches you in the first place.
If there is any money left over after the sale of the home, and after the executor pays the decedent’s debts, you would most likely receive cash in lieu of the property. However, it probably won't represent the home's full value. You’ll most likely receive less than what the decedent intended to give you, and you might have to share some of the proceeds with other beneficiaries. If the decedent bequeathed the home to you, and if he left another beneficiary the sum of $5,000, the total cash available at settlement of the estate would be apportioned between you. You would receive more of the house sale proceeds than the other beneficiary, because your bequest -- the home -- was worth considerably more than $5,000. In legal terms, this is known as “abatement.”
Some estates are totally insolvent. The decedent’s debts, taxes and bills exceed the value of all assets he left behind. In this event, you receive nothing. The executor liquidates all assets and gives the decedent's creditors as much money as she is able. You would lose your inheritance, but you still would not be responsible for any balance of your loved one's medical bills that the executor was unable to pay.