This is the eighth in a series of posts on the basics of D.C. probate administration and will describe the priority a personal representative will pay off the debts of the estate. You can read previous posts in this series including Part I: high-level differences between Virginia and D.C. estate administrations (here), Part II: qualifying to be a D.C. personal representative (here), and Part III: Opening the Estate (here), Part IV: Supervised/Unsupervised (here), Part V: Notice and VCNO (here), Part VI: the Inventory, and Part VII: The Account (here).
Once the personal representative has marshaled all of the assets of the estate and determined the debts the decedent owed, the personal representative can determine whether the estate is solvent or insolvent. A solvent estate would mean the decedent’s probate assets exceed the debts and estate administration expenses. That means the personal representative will eventually distribute out probate assets pursuant to the terms of decedent’s last will and testament to the heirs. However, if the estate is insolvent, where the estate’s debts and estate administration expenses exceed the probate assets then the personal representative will need to determine who gets paid.
Fortunately, D.C. provides a list of priority that should be followed. D.C. Code Section 20-906 establishes the order of priority as follows:
- Court costs, publication costs, and bond premium
- Funeral expenses not exceeding $1,500*
- Fiduciary and attorney’s fees not exceeding $1,000+
- The homestead allowance and the family allowance (more on this in another post)
- The exempt property allowance (more on this in another post)
- Reasonable and necessary medical and hospital expenses of the last illness of the decedent including compensation of persons attending the decedent.
- Claims for rent in arrears for which an attachment may be levied by law
- Judgments and decrees of any Court in the District of Columbia.
- All other just claims.
This is just a high-level picture of creditor’s claims and there are a variety of factors that could impact claims including the need to pay off secured debts, for example a home mortgage.
With insolvent estates, the personal representative should follow the priority order of paying off debts. This is done by first meeting all of the obligation in one level of priority before moving to lower priority order. Creditors lower in the priority order may not be paid, if there are insufficient assets in the probate estate.
*The law allows payment of funeral expenses in excess of $1,500 (1) if the estate is solvent and a will allows the personal representative to pay the amounts in excess in the personal representative’s discretion, (2) when a court allows amounts in excess of $1,500.00 but not more than $5,000.00, or (3) when the estate is solvent and all heirs or legatees waive the funeral expense limit in writing and the waivers are filed with the Court.