The probate process varies in each unique case. However, one of the things that remains consistent in the process is that the estate executor or administrator must pay all debts and obligations owed after successfully conducting an inventory and valuation of the estate assets. Moreover, there is a sequence as to whom the estate will pay first.
The order of payment
According to California’s probate law, an estate’s executor or administrator should pay all obligations of the estate before distributing the remaining assets to the heirs and beneficiaries. The order of payment is as follows:
- Costs of administration
- Debts secured by a mortgage, a deed of trust or other liens
- Funeral costs
- Expenses incurred related to the decedent’s last illness
- Family allowance
- Wage claims
- General debts, including unsecured obligations
However, if there are debts owed to the government or California that have preference under the law, then the estate should cover those obligations first.
Moreover, if there are multiple debts in each category, there will be no preference or priority. If the estate has insufficient funds to pay all debts, then the estate shall pay each debt in that category a proportionate share.
Easing worries and wonders
Handling debts and creditors during an estate’s administration can be tricky, especially if there are many of them and only a few estate assets. Accordingly, most heirs and beneficiaries just want to ensure the timely, efficient and fair administration and distribution of estates. Understanding the process and the laws that apply can be overwhelming. Nevertheless, a competent legal team can help affected parties navigate through the probate process.