How to Pay Off Debts From an Estate

Know How to Pay Off Debts From an Estate Sale

It happens to many of us. Someone we love dies, and we’re left with an estate that owes enormous amounts of money to creditors. What do you do?

The process may be complicated, but it’s handled by the estate’s executor, not the family. When someone dies, the executor of the will is responsible for reimbursing any debtors to who the deceased person owes money.

The decedent’s estate funds these debts. The executor follows a specific process that dictates the order in which debtors are repaid.

Repayment Process

The process of repaying debts after someone dies can take a while.

First, the Social Security Administration notifies creditors within about one or two months after the death. Then creditors file claims with the estate for debts the decedent still owes to them.

Probate law in each state dictates the exact order in which creditors are repaid. Heirs do not receive any disbursements from the estate until all expenses and debts have been paid.

Appraising Estate Value

The executor must first locate all the deceased person’s assets, including real estate, life insurance, bank accounts, valuables and businesses.

Each asset must appraise its value, typically by a business consultant or professional appraiser. If there is insufficient cash in the estate to pay expenses, the executor may need to liquidate some of these assets to pay back creditors. Liquidation typically requires court approval.

Order of Repayment

The exact order of repayment varies from state to state. In Ohio, for example, estate expenses, such as attorney fees and filing fees, are paid first. Funeral and burial expenses are paid next, but only up to caps imposed by the state. Debts are then repaid according to preference laws. For example, in Washington, medical expenses are paid first, followed by any due wages, and taxes or other government debt are paid.

But generally, the standard order is paying fees such as fiduciary, attorney, executor and estate taxes first, followed by funeral and burial costs; therefore, it’s crucial to speak with an expert in your state so as to make the best decisions.


It’s important to remember that if the estate runs out of money to repay the bills, the children and family members are not responsible for paying off the rest of the debt. In these situations, the executor asks the court to declare the estate insolvent.

If the estate is depleted, beneficiaries will only receive assets that are protected under state law from liquidation. Life insurance is an example of an asset that cannot be liquidated to pay off debts.?

Get Help With The Debt to Creditors Process

When a loved one dies, you may feel pressured to respond when creditors call but remember that this is not your responsibility. Instead, let the executor handle the process of dealing with the deceased loved one’s debt. Just know that the process might take quite a while.

If you need executor and probate help, please contact the New Jersey Executor & Probate Resource Center. Our expert team will assist you the right way. Get peace of mind with our professional services.

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