Few people plan and expect to pass away and even those that know it’s imminent leave behind the final set of bills covering their care, utilities, and other expenses. These final bills, along with funeral expenses, fall to the personal representative to handle.
The first step for most estates is to make an accounting of all the assets of the estate and gather information on all debts owed. Before any payments happen, the personal representative needs a clear picture of what the estate needs to pay and what types of assets are available to meet those expenses. While the ideal situation is that there are sufficient liquid assets available to meet all the payments, that is often not the case. Many estates have more non-liquid assets or assets that are going to take cash to care for and balancing these needs can be complicated. Further, not all assets may be available to pay the debts of the estate, either because they passed outside of the probate process or they are otherwise protected.
The personal representative needs to reach out to all known creditors, and in some cases may be required or wish to publish a notice to creditors in the newspaper to ensure that they have identified all debts that are owed. Creditors have an opportunity to present the estate with a final bill outlining what is owed so that the estate can make them whole. In addition to funeral expenses, common end-of-life bills include hospital, doctor, and other medical expenses, home bills, utility bills, credit card debt, bank debt, and other similar expenses.
Organizing End-of-Life Bills
Bills fall into two categories, those that come from administrating the estate and final bills from the person’s life. Final bills must be paid at a specific point in the probate process, but are only paid once. Once they are settled, they’re complete. Further, part of what a good estate attorney will do is help negotiate those final payments so that the estate is able to run and cover as many of it’s expenses as possible. The estate may also owe final taxes for the person and even, in rare cases, an estate tax before assets can be distributed.
Debt Priority Order
Executors are required to pay off the debt of the estate in a specific order as certain types of bills take priority over others. Once debts are known, a process which can take a few months, then they are paid off generally starting with estate administration costs and funeral expenses. After that, taxes and medical expenses not covered by insurance take priority. Secured debts are generally secured with some form of collateral and unsecured debt is either paid off, written off, or a lower payment amount is negotiated.
Preparation and a clear understanding of your financial picture can help streamline this process for your family. At Dunn Law Firm, we take the time to get to know you and your specific situation in order to create a comprehensive estate plan that meets your goals. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 to set up a free consultation today.