Who Gets Paid First When an Estate Has Multiple Creditors?

You see the stack of bills in front of you. You understand that the estate that you are administering has multiple debts and multiple creditors. As the personal representative of the estate you want to pay the debts fairly, but how do you get started? Who should be paid first?

California Law Takes the Guess Work Out of Paying Debts

As the administrator of the estate, it is your job to find out who all of the creditors are and how much they are owed. Then, it is your responsibility to pay the debts in accordance with California law. Specifically, state regulations generally require that debts be paid in the following order:

  • Debts owed to the United States or State of California.
  • Expenses related to the administration of the estate.
  • Secured debt such as mortgages and loans secured by other liens or deeds of trust.
  • Funeral expenses.
  • Expenses related to the decedent’s last illness.
  • Family allowances.
  • Wage claims.
  • General or unsecured debts such as credit card debt.

Generally, each class of debtors described above should be paid in full before moving on to the next class of debtors. If there are not enough assets to pay all of the secured creditors, for example, then the unsecured creditors will not be able to recover any money for the debts owed to them.

In order to avoid reopening a closed estate later and running into other potential problems, it is important to be sure that you are making the right decisions now with regard to satisfying estate debt. Please read our related links and call us today if you have questions about how to pay the debts of the California estate that you are administering.

 

James F. Roberts
Founder and owner of the Law Office of James F. Roberts and Associates, a premiere estate planning law firm
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