I do not think there is a conflict to have the executor as a creditor, as long as all creditors are treated the same. All creditors have a right to make a claim against the estate. But it seems like proof of the contract is going to be much tougher in the absence of a written contract. The executor would publish a notice to creditors. Creditors would make claims against the estate and the assets would subject to valid claims. If claims cannot be verified, then I would expect that the executor would disallow any such claims.
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Executors always need to retain a lawyer and in this complex situation that is even more vital. Part of the executor's job is to evaluate and resolve claims against the etate, which will be affected by documentation, although a provable oral claim is enforceable too. The executor may have to resolve some disputes in court and others by negotiation, and the fact that he is claiming money increases the chance he may have disputes with the heirs.
This is NOT a do it yourself project and legal help is needed ASAP.
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To add to the two answers you've already received, in Georgia, a deceased person's debts (legitimately owed debts) are to be paid from his probate estate before any assets can be distributed to the person's heirs or beneficiaries. If the appointed Executor is also a creditor for a significant sum, then the Executor must be extra cautious in handling the debts, so that the debt owed him or her is not given improper priority over other debts. Georgia law also sets out the order in which debts and other claims against the estate, such as a surviving spouse or minor child's year's support claim, a funeral expense, or an administrative expense are paid, and the Executor must carefully follow the laws to ensure that nothing is paid improperly. I agree with Mr. Ashman wholeheartedly- this is not a do-it-yourself situation, and the Executor needs to hire an experienced probate attorney to guide him or her. Otherwise, the Executor can end up personally liable to creditors, claimants, or beneficiaries for amounts distributed our paid out improperly.
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There is a statutory list of priorities for paying debt.
Obviously the debt associated with the probate process will take priority over all other debt such as filing fees, attorney fees, accountancy fees and the like.
Other debt such as secured debt will take priority over unsecured debt.
I might suggest you also look into whether your family member survivors are eligible for Years Support which would avoid all of this.