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Payment of Debts from a Deceased Person’s Estate

by May 31, 2020

Creditors of an estate must be paid by the personal representative of an estate before the estate can distribute assets and property to heirs or beneficiaries (personal representative includes personal representatives or administrators).

A personal representative is given a six-month time period from the day he was appointed to ascertain the assets and value in the estate and to determine who the creditors are. No creditors’ claims can be paid or enforced during this time period, with one exception, those who hold mortgage or vehicle loans or security interests on the estate’s property. If the secured debts are paid by the estate, the creditor can seek repossession or foreclosure. If the estate fails to pay a creditor and gives property directly to a beneficiary, the creditor can hold the personal representative accountable, as well as the beneficiary who received the property.

During the six-month period, the personal representative must notify creditors that the estate has been opened. The representative must publish a notice to creditors within 60 days of the date he or she takes office. This notice to creditors must run for four consecutive weeks in the official newspaper in the county where the probate proceeding is located. This notice can include a notice to debtors owing money to the estate (referred to as a “notice to debtors and creditors).”

Demands for payment must be made by creditors to the personal representative within three months after the fourth publication of the notice. Demands are not made to the court. A creditor’s failure to file a demand does not extinguish the debt, but there are consequences to creditors who fail to make a demand in a timely manner.

Concerning which debts to pay first, Georgia law provides that debts must be paid in the following order of priorities.

The first priority claim against estate assets is an award of year’s support to the family, which has top priority and which is paid before all creditors.

The second category of bills to be paid is funeral bills. A person who has advanced funds for funeral bills may be entitled to reimbursement.

Expenses of administration of the estate are third in priority, such as are court filing fees, advertising costs, professional services such as legal and tax advice, surety bond premiums, costs of sale, the personal representative fees, and similar items.

The fourth priority includes reasonable expenses of the deceased’s last illness. Professional advice may be needed to determine what treatments qualify for the last illness. Expenses for illnesses other than the last illness would be the lowest priority.

Unpaid taxes or other debts due to the State or the United States are to be paid in fifth priority.

The 6th priority includes judgments against the deceased, secured loans, and other liens created by the deceased during life. Under Georgia law, liens have priorities among themselves. A security interest or lien on a specific piece of property, such as real estate or a vehicle, is preferred only to the extent of such property. The last priority includes all other debts not mentioned above; examples of this are credit cards.

If the assets run out before all debts are paid, those lower priority debts are not paid. If the assets will run out within a certain priority level, all debts in that level are paid pro-rata (except secured creditors and lien holders).

Our firm handles will preparation, and probates, trusts, and estate litigation, and will be glad to give you any assistance needed on these types of matters.