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Do I have to pay my loved one's debts in a specific order?

Woman Inspecting Debt PaperworkAs the personal representative to an estate, you have many duties to perform during estate administration. One of the most important responsibilities is to pay off any outstanding creditor claims. The state requires that these debts be paid based on their priority, and Florida statutes include the order in which creditors’ claims must be settled.

Tiers for Paying a Family Member’s Debts During Florida Probate

In Florida, a deceased person’s debts are paid according to certain tiers. During the probate process, you should settle these debts starting with the first tier, ensuring that all debts falling under each group are settled before moving on to the next tier.

  • Tier 1. Any expenses incurred as a direct result of estate administration, any attorney fees required to assist in the closing of the estate, and your compensation for acting as personal representative are all paid first from the estate account.
  • Tier 2. Florida law allows a payment of up to $6,000 from the estate for funeral and burial expenses. These costs are usually paid by you (or another family member) before probate starts, but you can collect reimbursement after Tier 1 costs are covered.
  • Tier 3. Tier 3 covers your loved one’s outstanding federal income tax payments, estate taxes, and unpaid court fees, fines, or expenses. It also encompasses debts with a preference under federal law, including debts owed to Medicaid or other government assistance programs.
  • Tier 4. Payment for any necessary and reasonable medical care that your loved one received in the 60 days prior to death is paid out under this tier. In addition, a family member may collect payment at this time if they acted as a carer or tended to your loved one at the end of their life. If your loved one passed away in a nursing home, hospital, hospice, or other treatment facility, any costs not covered in care incurred in the last 60 days will also be paid.
  • Tier 5. Tier 5 is reserved as a family allowance for your loved one's surviving spouse and children. Surviving family members can receive up to $18,000 to supplement their income and help them maintain their household. This amount doesn’t have to be settled immediately, but can be paid for up to a year after your loved one's death.
  • Tier 6. This tier covers the payment of any outstanding or past due child support payments (arrears) your loved one owed at the time of death.
  • Tier 7. If your loved one owned a business and owed outstanding payments to suppliers, customers, or creditors, these would be paid after child support arrears. This amount is not paid with your loved one’s personal assets, but settled using any assets owned or acquired by your loved one’s business.
  • Tier 8. Any claims that fall outside of Tiers 1 through 7 are paid out in this tier. For example, court judgments against your loved one would be settled last. If there are still funds in the estate at this stage, Tier 8 may also cover any excess on burial expenses and your loved one’s medical care.

What If Paying All of the Creditors Leaves Nothing in the Estate?

Under Florida law, if the debts are settled in order but the estate is insufficient to pay the entirety of the next tier, the creditors in the latter tiers shall be paid ratably in proportion to their respective claims.

It’s vital to understand that not all of your loved one’s debts will necessarily have to be paid. Once you have notified all creditors about your loved one’s death, creditors are required to file claims for payment with the probate court within 30 days (occasionally this period is extended to 3 months). If any creditor allows this period to expire without a response, the estate may not have to pay any amount outstanding.

You also have the right to dispute any creditor claims that don't have merit. This is where our experienced estate administration attorneys can really make the difference. We carefully investigate each claim, including the balance on the debt, the validity of any fees, and whether the creditor engaged in unethical collection practices. We may be able to negotiate the outstanding amount owed or force the creditor to surrender the right to collect.

If you need help with your responsibilities as a personal representative, our attorneys can guide you through the necessary steps of closing the estate and ensure everything is done in accordance with the law. Contact us today to set up a consultation and get answers to your questions, or read through our free book, Navigating the Florida Probate Process.

 

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