If estate can not afford to pay all for items: mortgages of real property, other creditors, probate attorney, administrator, operation expense (mortgage payment, insurance, maintainence) for estate, funeral cost.
Estate Planning Attorney
Assuming Decedent resided in CA:
1.Priority of payment of creditor claims. PC 11420 sets forth the order of payment of the decedent’s debts, expenses of administration and charges against the estate. If the estate is insolvent and there are insufficient assets to pay general debts, it may be necessary for the PR to pay a portion of each general debt, pro rata. PC 11420 provides:
(a) Debts shall be paid in the following order of priority among classes of debts, except that debts owed to the United Statesor to this state that have preference under the laws of the United Statesor of this state shall be given the preference required by such laws:
(1) Expenses of administration. With respect to obligations secured by mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, only those expenses of administration incurred that are reasonably related to the administration of that property by which obligations are secured shall be given priority over these obligations.
(2) Obligations secured by a mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, in the order of their priority, so far as they may be paid out of the proceeds of the property subject to the lien. If the proceeds are insufficient, the part of the obligation remaining unsatisfied shall be classed with general debts.
(3) Funeral expenses.
(4) Expenses of last illness.
(5) Family allowance.
(6) Wage claims.
(7) General debts, including judgments not secured by a lien and all other debts not included in a prior class.
(b) Except as otherwise provided by statute, the debts of each class are without preference or priority one over another. No debt of any class may be paid until all those of prior classes are paid in full. If property in the estate is insufficient to pay all debts of any class in full, each debt in that class shall be paid a proportionate share.
This does not create an attorney/client relationship. This does not constitue legal advice. It is limited to facts of the question. You should consult an attorney in the appropriate state involved before making any decisions based on this answer
1 found this helpful
11 lawyers agree
Mr Arvin offers the controlling statute. For those readers who are interested in the PA rules concerning priority of payments please see my article entitled Pennsylvania Probate: What Debts Take Priority at the following link: http://www.sjfpc.com/pa_probate_law_section_3392_estate_debt_priorities.html. Although this relates to PA law, in most states this is what needs to be done before beneficiaries can be paid.
Hope this helps.
Please remember to designate a best answer to your question.
Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is email@example.com , his website for more tax, estate and business articles is www.sjfpc.com. and his blog is
LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is firstname.lastname@example.org , his website is www.sjfpc.com. and his blog is <http://frommtaxes.wordpress.com/> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.
2 lawyers agree
If an estate is insolvent the fiduciary must account to the creditors and pay them off in the order of priority provided by the probate code.
This hass become increasingly common in recent years and there are quite a few attorneys with experience in this area.
If you've got a buyer for the house, there's actually a trick to get costs of administration related to the house out of the estate ahead of the secured lender. This means that if one had been paying the mortgage out of one's own pocket, one MIGHT get reimbursed ahead of the secured lender after a court-confirmed sale.
The whole process is tricky and must be done quickly, but I'd be happy to share the necessary citations with the attorney for the estate.
The foregoing does not constitute legal advice and does not form an attorney-client relationship. This information is general in nature and is intended for the public as a whole. Also, this message is not privileged, is not confidential, and you should not include any personally-identifiable information that you would like kept private on the message board. Any person may contact my office directly, but doing so only makes one a potential client, not an actual client. I may or may not agree to represent you after learning more details about your specific case.
1 found this helpful
3 lawyers agree