Paying the Debt of an Estate

March 11, 2019

Delaware County Wills and Estates Lawyers weigh in on paying the debt of an estate. When a person dies, assets owned solely in their name become part of their estate – and so do their debts. Should the latter exceed the former, the estate may prove insolvent.

For most estates, the assets will exceed the debts; but heirs cannot receive assets left to them until the debts of the estate have been paid. That is the job of the estate’s executor, also known as the personal representative.

Pennsylvania Law on Estate Debts

In Pennsylvania, the executor must advertise that the dead person – known as the decedent – has died in a newspaper serving the late person’s county of residence at the time of their death. This legal notice is published for three weeks in a row, and another notice is also advertised in a legal publication.

Creditors in Pennsylvania then have one year from the time of the date of the first advertisement, not the date of the decedent’s death, to come forward with claims of monies owed by the decedent.

The executor should notify known creditors, such as the decedent’s credit card company if the account was solely in their name, of the death. These claims are then submitted to the executor and paid from estate funds.

There are other creditors requiring payment, such as the funeral home, cemetery, and gravestone provider, for debts incurred after the decedent’s death, which are also often paid for by the estate.

Personal Liability for the Personal Representative

The executor is often a family member or a close friend of the decedent. They are in charge of managing all aspects of the estate, including hiring lawyers, accountants, and appraisers.

Estate beneficiaries may want their share of the estate assets as soon as possible, but the executor cannot distribute these assets until the one-year anniversary of the first advertisement has passed, and creditors can no longer present their claim to the estate. Should the executor distribute assets beforehand and a large, unexpected claim comes in, they will find themselves personally liable for the amount.

When Debts Exceed the Estate

If it turns out the estate does not have sufficient assets to pay all creditors, the executor must pay out claims with the assets available in a specific manner. That means not paying any of the claims until the one-year period for creditor claims has expired.

First priority for payment goes to estate administration costs, including legal and probate fees. Next is the family exemption, currently $3,500 per person, for any family member who lived with the decedent at the time of the death. Third priority is the cost of the funeral and related debts, along with any medical payments owed.

There are additional categories down the line, and each debt is paid relating to its priority status, until estate funds are depleted.

Delaware County Wills and Estates Lawyers at Eckell Sparks Advise Executors Paying the Debt of an Estate

The executor of an estate needs professional guidance in paying the debts of an estate, as well as other estate management aspects. Contact a skilled Delaware County wills and estates lawyer at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthew & Auslander, P.C. to help with estate administration. Call us today at 610-565-3701 or contact us online for a free consultation. We represent clients in Delaware County, Chester County, and Montgomery County from our offices in Media and West Chester, Pennsylvania.