I regularly receive this question from clients. This is already a very stressful situation for families and you add the financial pressures that begin to mount, and it can sometimes become too much for families. A lot of times, families begin just paying the bills as they come in. However, this is usually the worst decision that a family can make.
First, some basic items when a loved one dies. If you have a loved one die who has a Will, there will be an executor named in the will. This is the person in charge of managing the person’s estate, paying the final bills, paying any taxes that are due, and distributing what is left to the surviving family members. If your loved one dies without a will, you do not have an executor, but you have a Personal Representative that must be appointed and confirmed by the court, and typically must also submit an insurance bond to the court.
However, there is an order of priority in which certain debts must be paid from the proceeds of the estate.
- First, the Costs of Administration Must Be Paid Including Compensation to the Executor and Attorney Fees
- Second, Reasonable Funeral Expenses
- Third, Taxes
- Fourth, All other demands and claims made by creditors within four months of notice to creditors
If there are not enough assets to pay the claims of the estate, then the estate is considered to be insolvent. In this case, there are claims that may not be paid their full balance. Therefore, if you begin paying debts the day they show up in the mail, you may be paying debts that are not legally enforceable.
In addition, as the executor or personal representative of the estate, you have a fiduciary responsibility to the estate. If you are paying claims from the estate that are not legally enforceable, you may be held personally liable to the estate!
As an executor, before you pay any bills, make sure you receive competent legal advice of your duties and responsibilities as the executor of the estate.
If you have questions about what to do as an executor, please CLICK HERE and Download Our Free Book What To Do When a Loved One Dies. I’m sure you will find the information to be very helpful.