Estate Payments: Who Gets Paid First?

When managing a deceased person's estate, one of the primary responsibilities of the executor is to ensure that all debts and obligations are settled before distributing the remaining assets to the beneficiaries. Understanding the order in which payments should be made is crucial to avoid legal complications and ensure a smooth probate process. This blog post will outline the priority of estate payments.

1. Administrative Costs and Fees

The first payments to be made from the estate are administrative costs and fees. These include court costs, attorney fees, executor fees, and other expenses associated with managing and settling the estate. These costs must be paid before any other debts or obligations.

2. Funeral and Burial Expenses

Next in line are the funeral and burial expenses. These costs are given high priority to ensure that the deceased receives a proper burial or cremation. This includes costs for the funeral service, burial plot, headstone, and any related expenses.

3. Debts and Taxes

After administrative and funeral expenses, the estate must settle any outstanding debts and taxes. This includes:

• Secured Debts: Debts secured by collateral, such as mortgages or car loans, must be paid first within this category.
• Unsecured Debts: These include credit card debts, medical bills, and personal loans.
• Taxes: Any taxes owed by the deceased, including income taxes and, if applicable, estate taxes, must be settled.

4. Family Allowances

Many states, including Arizona, provide for a family allowance to support the surviving spouse and minor children during the probate process. This allowance is typically a fixed amount and is given priority over other distributions.

5. Remaining Claims

Once the above payments are made, any remaining claims against the estate are addressed. This can include additional unsecured debts or claims that did not fall into the higher priority categories. These are paid on a pro-rata basis if there are insufficient funds to cover all claims in full.

6. Distribution to Beneficiaries

Finally, after all debts, expenses, and claims have been settled, the remaining assets can be distributed to the beneficiaries according to the will or state intestacy laws if there is no will. This final step ensures that the deceased's wishes are honored and the estate is fully settled.

Conclusion

Understanding the order of estate payments is essential for executors to manage the probate process effectively. By following the priority outlined above, executors can ensure that all obligations are met and that the estate is distributed fairly and legally to the beneficiaries.