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Picture this: A kitchen table covered with important papers to review after a loved one’s passing. For many who step into the role of executor, this moment marks the beginning of an important responsibility—one where knowledge and guidance can make all the difference. While questions about credit card bills, mortgages, and medical expenses may seem daunting at first, there’s a clear path forward with the right understanding.
If you’re the executor or heir of someone’s estate, you might have questions about how the estate’s debts and expenses will be handled during probate. Here’s what you need to know.
Identifying and Prioritizing Debts in Probate
During probate, executors must identify and prioritize debts owed by the estate. This involves reviewing the deceased’s financial records, such as bank statements, credit card bills, and loan documents. Probate laws often require executors to pay secured debts, such as mortgages, before unsecured ones, like credit card balances. Federal and state taxes often take priority over other debts.
Assessing the Estate’s Assets to Cover Debts
Executors must also evaluate the estate’s assets to determine how to cover debts. This includes identifying cash accounts, investments, and physical property like real estate or vehicles. The executor must estimate the value of each asset and determine which can be used to pay debts. Certain assets, like life insurance payouts or retirement accounts, might not be part of the probate estate and cannot cover debts.
The Legal Process for Notifying Creditors
Executors must notify creditors according to the probate court’s rules. Most states require the executor to publish a notice of death in a local newspaper. This informs unknown creditors of their right to file a claim. Executors must also send direct notices to known creditors. Creditors then have a limited time to submit claims against the estate. The executor must track all claims and verify their validity before approving payments.
Disputing or Verifying Creditor Claims
Executors must review creditor claims carefully. Some claims could be invalid or inflated. Executors should request supporting documents, such as contracts or account statements, to verify each debt. If a claim seems incorrect, the executor can dispute it. This often involves sending written notice to the creditor explaining the objection. If the creditor insists on payment, the dispute might require court resolution.
Paying Taxes and Administrative Expenses During Probate
Taxes and administrative expenses must be paid before distributing the estate to heirs. Executors should file the deceased’s final income tax return and pay any federal or state taxes owed. They must also handle estate-specific taxes, such as estate or inheritance taxes, where applicable. Common administrative expenses include court filing fees, attorney fees, and appraisal costs.
Selling Estate Assets to Pay Debts
If the estate lacks enough cash to pay debts, the executor might need to sell assets. Executors can sell real estate, vehicles, or other valuable property to generate funds. Court approval is often required for these sales, especially for major assets. Executors should hire professionals, such as real estate agents or auctioneers, to ensure fair market value for sales. Proceeds from the sale go toward paying creditors according to the debt priority list.
What Happens if the Estate Cannot Cover All Debts?
When an estate lacks sufficient assets to cover all debts, it is considered insolvent. Executors must prioritize payments based on state probate laws. Secured creditors, like mortgage lenders, usually get paid first. Taxes and administrative expenses often follow. Unsecured creditors may receive only partial payment or nothing at all. Executors should notify creditors if the estate cannot pay their claims in full.
How an Attorney Can Help in Managing Probate Debts
Legal assistance can simplify the process of managing debts during probate. Attorneys can help executors understand their responsibilities and comply with court rules. They can provide guidance on prioritizing debts, verifying claims, and handling disputes. Attorneys can also assist with complex issues, such as insolvent estates or tax obligations, and represent executors in court if necessary. Working with an attorney reduces the risk of errors and potential legal issues.
Contact Our Westport Probate Lawyer Now
If you need help managing debts and expenses during probate, contact The Law Offices of Patricia Bloom-McDonald today. Arrange your initial consultation with us now to get clear answers and guidance tailored to your situation.
Located in Westport, The Law Offices of Patricia Bloom-McDonald proudly serves clients across Massachusetts, including all of Bristol and Norfolk Counties, Plymouth, and the southern coast. Specific areas of service include New Bedford, Fall River, Dartmouth, Acushnet, Taunton, Dighton, Berkley, Swansea, Somerset, Seekonk, Fairhaven, Marion, Raynham, Easton, Mansfield, Attleboro, North Attleborough, Rehoboth, Lakeville, Bridgewater, Rochester, Norton, Assonet, Stoughton, Canton, Sharon, West Bridgewater, Brockton, Whitman, Maynard, Quincy, and Cape Cod. If you cannot come to us, we will come to your home, office, or a convenient location of your choosing. The initial consultation is complimentary.