One of the primary duties of a personal representative/executor is to settle any outstanding debts remaining for the estate in question. Obviously, there are other duties as well; however, settling the affairs of the estate must be handled in the proper order. For example, if you distribute assets to beneficiaries first, and then do not have enough funds to settle the estate’s debts, you could be personally liable for those expenses.
Schindel Segal Mendoza PLLC is a sound Minnesota estate planning firm that can provide invaluable assistance with the probate process, especially if you have been named as a personal representative/executor. This includes helping you validate and settle all debts for the estate.
Estate Probate Priorities
As the personal representative/executor of an estate, you are responsible for settling all the affairs set forth in the will of the decedent, or ordered by the probate court if no will exists. Minnesota State Law sets forth the order by which you are to settle the estate’s debts and expenses.
- Funeral expenses
- Estate expenses, including legal fees, executor fees and court fees
- Payments to beneficiaries
The State of Minnesota allows up to four months for creditors to submit claims to the estate for verification and payment. It is a good practice to wait until this time frame has expired to settle all outstanding debts, if possible. Some debts may have to be settled first, such as final utility bills and funeral expenses.
What If the Estate Goes Broke?
If the estate runs out of funds before all valid debts are paid, the probate court will require you, as the personal representative, to liquidate any remaining assets (like real estate or retirement accounts) to cover the outstanding debts. If you liquidate all assets and still are unable to pay all the outstanding debts, you must petition the court to declare the estate insolvent. The court will then decide how much to pay to each creditor. Remaining balances will remain unpaid and beneficiaries will receive no assets.
As the personal representative/executor, you may be required to liquidate so many assets to cover estate debts that you are unable to completely fulfill the bequests to beneficiaries stipulated in the will. In this case, the probate court will decide what each beneficiary should receive. This reduced amount in the intended benefit is called an abatement.
Schindel Segal Mendoza PLLC can assist you with carrying out these and other probate matters in Minnesota. Call us at 952-358-7400 if you have been selected as a personal representative/executor and need assistance.