What is the order the assets of the estate should be used to pay debts?
Asked by: Miss Sallie Kautzer V | Last update: January 6, 2026Score: 4.8/5 (37 votes)
If a person dies with enough assets to cover their debts, creditors will be paid first. After creditors are paid, beneficiaries will receive what is left over. If there isn't enough to cover the debts, creditors may get some, but not all, of what they're owed.
In what order should debts be paid for an estate?
Secured debts will get paid first, as they are connected to the assets themselves. Unsecured debts, like credit cards or personal loans, are generally paid last. As executor, it is your legal obligation to put off payment of unsecured debts until funeral costs, estate expenses, taxes, and medical expenses are paid off.
Which debts of the estate are satisfied first?
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.
What types of assets should be used to pay any estate expenses?
Liquid assets are often used to pay the debts of an estate because they are easily accessible. Some examples include bank accounts, money market accounts, stocks, and bonds. Tangible assets are also used to pay the debts of an estate. Examples may include cars, jewelry, electronics, or musical instruments.
How do you pay a debt from an estate?
The executor — the person named in a will to carry out what it says after the person's death — is responsible for settling the deceased person's debts. If there's no will, the court may appoint an administrator, personal representative, or universal successor and give them the power to settle the affairs of the estate.
How to Pay Estate Debts
How to pay bills while an estate is in probate?
Handling Bills During Probate
Creditors may submit both formal and informal claims. Most claims are informal—that is, they're just ordinary bills, sent to the deceased person, that get forwarded to the executor. The executor has authority to pay these debts as they come in, using estate assets.
What happens if the executor does not pay debts?
Executors who violate the order of creditors may find themselves on the hook for unpaid balances. As mentioned above, because you can be held personally responsible for mistakes made in settling the estate, it is advisable to seek the assistance of an attorney trained in wills and estates.
Can personal possessions be distributed before probate?
Personal possessions should not be distributed before probate is completed, as they are part of the estate that must be inventoried and appraised. Distributing items prematurely could lead to legal disputes, especially if they are intended for specific beneficiaries.
Can you use a deceased person's bank account to pay their bills?
An executor can only use the funds from a deceased person's bank account for estate-related expenses and to pay off the deceased person's debts. If any funds remain, they must distribute them to the estate beneficiaries in accordance with the terms of the deceased person's will.
Does an executor have to show accounting to beneficiaries?
As an executor, you must provide a formal accounting at least once a year, but beneficiaries can request an informal probate accounting in California at any time. When they do, you must produce it.
What is the order of repayment of debt?
Order your debts from highest interest rate to lowest interest rate. Make the minimum payment on each debt by the payment due date each month. Use any extra cash to pay more off the debt with the highest interest rate. Once you've cleared the first debt, pay more off the one with the next highest interest rate.
Can an executor decide who gets what?
While executors have discretion in some areas, your core decision-making is bounded by: The deceased's will. You must follow their distribution wishes rather than diverging based on your own judgments.
Can creditors go after an estate?
If an estate runs out of money before all debts are paid, creditors can pursue other avenues of collecting debt, such as going after non-probated assets like payable-on-death assets (e.g., bank accounts), transfer-on-death assets (e.g., automobiles) and trust fund distributions.
Do I have to pay my deceased mother's credit card debt?
When a loved one passes away, you'll have a lot to take care of, including their finances. It's important to remember that credit card debt does not automatically go away when someone dies. It must be paid by the estate or the co-signers on the account.
In what order should debt be paid off?
- Order your debts by interest rate. Start with the highest rate and work your way down to the lowest rate.
- Start chipping away at your highest-interest debt first. Use any extra money you can find to pay down your highest-interest debt. ...
- Work your way down the list until you're debt-free.
How does money get distributed from an estate?
To begin the inheritance distribution process, you must submit the will through probate. After the probate court reviews the will, it's authorized to an executor, and the executor then legally transfers all assets—again, after settling taxes and debts. A will is distributed through the probate process.
What not to do immediately after someone dies?
- Not Obtaining Multiple Copies of the Death Certificate.
- 2- Delaying Notification of Death.
- 3- Not Knowing About a Preplan for Funeral Expenses.
- 4- Not Understanding the Crucial Role a Funeral Director Plays.
- 5- Letting Others Pressure You Into Bad Decisions.
Is it illegal to withdraw money from a deceased person's account?
A court must grant you the power to withdraw money from the account if you're neither a joint owner or an account beneficiary. For example, an executor must produce proof of executor status and a certified copy of the death certificate to collect funds and place them in an estate account.
Why shouldn't you always tell your bank when someone dies?
If you contact the bank before consulting an attorney, you risk account freezes, which could severely delay auto-payments and direct deposits and most importantly mortgage payments. You should call Social Security right away to tell them about the death of your loved one.
Which of the following assets do not go through probate?
Additional assets that don't need to go through probate include: Retirement accounts, like IRA's and 401(k), that have a named beneficiary(ies) Any property held in a living trust.
Is it illegal to keep utilities in a deceased person's name?
Yes, that is fraud. Someone should file a probate case on the deceased person.
How long can you keep an estate open after death?
State laws typically govern the specific timeframe for keeping an estate open after death, but the average is about two years. The duration an estate remains open depends on how fast it goes through the probate process, how quickly the executor can fulfill their responsibilities, and the complexity of the estate.
How are debts paid from an estate?
The executor of an estate will need to oversee the payment of claims and debts from the assets of the estate, although the executor is usually not personally liable for them. In some cases, however, the estate may not need to repay a certain type of debt.
Who is responsible for hospital bills after death?
And in nine “community property” states, including California and Texas, spouses may be equally responsible for debts incurred during the marriage, including medical debt. Other states may have laws that hold spouses responsible for paying certain essential costs, like health care.
How to find assets of a deceased person for free?
How to find assets of a deceased person for free. Start by going through the deceased's personal records, such as bank statements, investment accounts, and tax returns, to identify any financial accounts or assets they owned. Check with the county recorder's office to see if they owned any real estate.