One of the first items of business
in administering a decedent's estate is the paying of valid debts. In the
probate process, the appointed personal representative must locate creditors of
the estate and give notice to them. The creditors have a certain amount of time
in which to make a claim against the estate.
Minnesota law sets forth a priority
for how debts are paid by the estate, called Classification of Claims. While
some creditors may be more assertive than others, the squeaky wheel does not
get the oil. This is the pecking order for the payment of estate debts:
- Expenses related to administering the estate, including attorney fees.
- Reasonable funeral expenses.
- Any debt having preference under federal law, including federal taxes.
- Medical expenses related to the decedent's final illness.
- Medical expenses incurred during the year prior to the decedent's death.
- Any debts under state law, including Minnesota taxes.
- Any unsecured debt, such as credit cards, utility bills, etc.
If the total value of debts exceeds the estate assets, the estate is deemed insolvent. In such a case, some of the debts farther down the list may not be paid at all. And unfortunately for the heirs of the estate, they will not receive a share of estate assets.