Death brings many tasks, and dealing with leftover debts ranks among the most important. As an estate administrator, you must know which bills to pay first and how to protect yourself from costly mistakes.
What counts as estate debt?
When someone dies, their debts don’t go away. These include mortgages, credit cards, medical bills and tax payments. The estate must pay these bills before giving any money to heirs. Each state sets a time limit for creditors to claim money from the estate – often three to six months.
The order of debt payment matters
The law tells you which debts to pay first:
- Funeral costs
- Estate admin fees
- Federal and state taxes
- Final medical bills
- Home and car loans
- Credit cards and personal loans
Take note that as a family member, you won’t have to pay the deceased person’s debts unless you:
- Signed for the loan together
- Share a joint account
- Live in a community property state
- Must pay specific bills under state law
When there isn’t enough money
Sometimes, an estate runs out of money before paying all debts. This means some bills won’t get paid. As an administrator, you must pay debts before giving anything to heirs. If you provide money to heirs first, you might have to pay creditors with your own money.
Getting these steps wrong can lead to serious problems. Many choose to work with an estate lawyer who knows local laws and can help avoid costly mistakes. A lawyer can guide you through deadlines, paperwork and legal requirements while protecting your interests.