Estate administration is a complex process. The personal representative named by the decedent or appointed by the California probate courts has to secure estate resources and review financial records. They need to provide the courts with a copy of the will and an inventory of assets. They usually need to use those assets to fulfill the financial obligations of the decedent.
Paying debts and taxes are among the most important responsibilities that a personal representative must fulfill during estate administration. Mistakes during that process can sometimes lead to financial liability for the personal representative. Not only do they need to ensure that they pay creditors before they distribute estate resources to beneficiaries, but they typically also need to repay creditors in the right order of priority.
What debts are the most important during probate proceedings?
State law provides clear guidance
The good news for personal representatives in California is that state statutes very clearly outline the right order of priority for financial obligations. Particularly in scenarios involving an insolvent estate with more debts than assets, adhering to that order of priority is of the utmost importance.
Any debts owed to the United States government or the state of California receive first priority consideration during estate administration. Taxes, including estate taxes and income taxes owed by the decedent, may require priority consideration. After that, the personal representative must use estate resources to cover probate costs. They pay for court expenses and legal representation using estate resources.
Secured debts, such as mortgages, come next. Funeral expenses are the fourth priority, followed by medical expenses incurred by the decedent. Family allowances to surviving spouses and children receive consideration next when they are necessary.
Wage claims by workers have the penultimate level of priority, and all remaining debts, such as credit card balances, have the lowest level of priority. Ensuring that creditors receive repayment in the proper order is critical during probate proceedings. In some cases, paying financial obligations may mean there is little property left to distribute to the beneficiaries or heirs of the estate.
Personal representatives may need the support of an attorney to fulfill all of their responsibilities. Learning more about debts and other estate administration responsibilities can help personal representatives fulfill their duties while minimizing personal exposure.