When a loved one passes away and their estate goes through probate, the person handling their estate’s administration has to first settle their debts and obligations before distributing the remaining assets to the decedent’s heirs and beneficiaries.
But what if there are multiple obligations? Then the personal representative would have to settle them according to the state’s order of payment guidelines.
The sequence personal representatives follow
Estate executors and administrators follow a specific sequence when paying for the decedent’s debts and obligations. Under California probate laws, payment should be made in the following order:
- Debts to the U.S. government and the state of California
- Estate administration expenses
- Secured obligations
- Funeral costs
- Medical expenses related to treating the decedent’s last illness
- Family allowance
- Wage claims
- Other general obligations, including unsecured debts
For an estate representative to successfully follow this hierarchy of payment, it is vital to notify all creditors and make a complete and accurate inventory of the decedent’s debts and obligations.
Common questions related to the order of payment
What if there are multiple claims in one category? In this situation, the law does not give preference as to who gets paid first. The estate’s personal representative will pay obligations as valid claims come.
What if the estate’s total value is insufficient and cannot cover all obligations in the same category? In this case, the personal representative pays each creditor a proportionate share.
Settling an estate’s debts is crucial for both the estate’s personal representative and the heirs and beneficiaries. Nonetheless, clarity of the process is possible with proper research and competent legal guidance.