How does an executor know which creditors to pay?

When the estate has enough assets to pay all debts, the creditors can be paid in any order. It’s not uncommon for there to be insufficient funds and even assets to sell to pay all creditors. In this case, state law specifies the priority of creditors and debts.

Most states use a similar order of priority for the executor to pay debts of the estate:

• Administrative costs are first. This includes court fees, filing fees, and attorney fees.
• Family exemptions. Payments to help family members of the decedent cover living expenses during probate is usually the second priority.
• Funeral and final expenses. There may be a cap on the allowable expenses for burial and funeral costs in some states. This includes the cost for cremation, urns, interment, and a funeral service.
• Government debts. This includes income taxes, property taxes, and estate taxes.
• Final medical expenses. Next is the medical costs associated with the decedent’s final illness or injury which take priority over other unsecured debts like credit card debt.
• Other claims. In most states, there is no priority for other unsecured debts. Sometimes debts are paid based on the date of the claim or debts may be prorated.