Order of Priority in Inheritance and Creditor Claims

At the absolute top of the Order of Priority are the expenses necessary to manage the estate itself, including court costs, attorney fees and the personal representative’s commission. The law recognizes that if these fees are not protected, no professional would agree to handle the complex work of an insolvent probate. Immediately following these administrative costs are reasonable funeral and burial expenses, reflecting a public policy interest in the dignified disposition of the deceased. Finally, the government’s claims for unpaid income or property taxes often hold a super-priority status that can wipe out the recovery for everyone else if not managed with forensic precision.

A critical distinction in the Order of Priority is between secured creditors, who hold a lien on a specific piece of property, and unsecured creditors, who only hold a general promise to pay. A mortgage lender or an auto financier has the right to seize their specific collateral regardless of the claims of other creditors, effectively moving them out of the general probate pool. Conversely, credit card companies, medical providers and personal lenders are typically at the bottom of the list, sharing proportionally in whatever capital remains after the high-priority claims are exhausted. We specialize in deconstructing these debt categories to identify potential flaws in a creditor’s security interest, potentially reclassifying their claim to favor our clients.

A surviving spouse often has a superior claim to a specific dollar amount of the estate’s assets to provide for their immediate living expenses during the probate process. This family allowance is often paid out even before the decedent’s taxes or funeral bills, making it one of the most powerful tools in the Order of Priority. We assist our clients in calculating and filing for these maximum allowable protections, ensuring that the family’s needs are met before the estate’s capital is consumed by third-party debt collectors. Asserting these rights early is the only way to prevent a total displacement of the surviving partner from their financial security.

In many states, the family residence is protected from the claims of unsecured creditors through a homestead exemption that allows a spouse or child to remain in the home even if the decedent was heavily in debt. While the mortgage lender’s priority remains intact, other creditors cannot force a sale of the home to satisfy their judgments if the equity falls below the homestead threshold. We provide the aggressive advocacy needed to defend these exemptions, building a legal barrier around your primary residence and preventing the forced liquidation of the family legacy to pay off the decedent’s old debts.

Assets such as life insurance proceeds, retirement accounts with named beneficiaries and assets held in a living trust often pass outside of the probate process entirely. This means they are not subject to the Order of Priority that governs the decedent’s individual bank accounts and physical property. For a beneficiary, the goal is to ensure that these assets are never pulled back into the probate estate to satisfy the decedent’s debts. We provide a formidable defense against creditor attempts to reach these non-probate buckets, asserting the legal independence of the trust and the finality of the beneficiary designations.

When an estate is insolvent, creditors will often look for large transfers of money or property that the decedent made to family members shortly before their death. If these transfers were made for less than fair market value or with the intent to hinder creditors, the court can void the transfer and bring the assets back into the estate to be distributed according to the Order of Priority. We specialize in both the defense of legitimate family gifting and the prosecution of recovery actions when an administrator has improperly moved assets to favored relatives. This level of forensic oversight is the only way to ensure that the priority list is followed with the integrity required by law.

In an insolvent estate, it is essential to aggressively challenge every incoming creditor claim to determine if it was filed within the statutory period and if the debt is actually supported by a valid contract. Many debt collectors will file claims for old, expired debts or for amounts that include illegal interest and fees. By successfully striking these invalid claims, we increase the amount of money available for high-priority claimants and heirs. Our firm conducts a thorough audit of every claim filed against the estate, ensuring that only legally enforceable debts are recognized in the final Order of Priority.

If an administrator pays one creditor ahead of another in the same priority class, or pays a lower-class creditor while a higher-class claim remains unpaid, they have committed a preferential payment. The law allows the disadvantaged creditors to sue the administrator personally to recover the lost funds. We provide the legal oversight needed to prevent these errors or to pursue administrators who have mismanaged the estate’s limited funds. Ensuring that the distribution is done in the exact sequence required by the probate code is the only way to protect the personal representative from personal liability and to ensure a fair result for all parties.