What Happens When an Estate is Insolvent in Florida?
An insolvent estate is one in which the decedent, or the person who passed, leaves behind more debt than assets, meaning the estate amounts to bankruptcy. Ultimately, debts don’t simply disappear when a debtor dies, and the creditors who own these debts have the right to file a claim against the decedent’s estate. Even someone with considerable assets can have immense debts, which means that even a large estate can be deemed insolvent. The path forward in these cases is challenging, but our experienced South Florida probate law attorney at Brian K. McMahon, P.A., welcomes the opportunity to help.
Florida’s List of Priorities for Paying Creditor Claims
The State of Florida has a list of priorities for paying creditor claims in probate. These proceed in the following order from highest priority to least:
- The cost of administering the estate itself, which includes legal expenses
- The cost of the decedent’s funeral and interment, up to a specific amount
- The decedent’s tax and legal debts
- The decedent’s final medical expenses
- A family allowance of up to a specific amount
- Any unpaid court-ordered child support owed by the decedent and debts acquired by the decedent’s business
- Any unsecured debts
When it comes to unsecured debts, there is no prioritization system. Instead, the amount left over after the higher-priority debts are covered is divided between the creditors in direct proportion to the amount each is owed.
The Matter of Beneficiaries
It is important to note that heirs who are named in a will are not legally liable for covering the testator’s debts. Responsibility only applies if an heir voluntarily assumes it. However, if the estate is insolvent, its debts are paid before anything passes to the heirs; declining to help cover those debts can still mean there’s little or nothing left to inherit.
In other words, assuming responsibility for a relative’s debt could be a strategic move, but it comes down to carefully weighing the pros and cons in the context of your unique case. The process is clearly complicated, and it highlights the importance of having a skilled probate law lawyer backing you up from the outset.
The Matter of Creditors
Not every creditor to whom the decedent owes money will necessarily file a claim against the estate. And some creditors are willing to negotiate settlements for considerably less than the full amount owed. This means that what is considered an insolvent estate could, in the end, have something left over for the decedent’s heirs.
Reach Out to Our Experienced South Florida Probate Law Lawyer for More Information Today
Brian McMahon at Brian K. McMahon, P.A., is our compassionate South Florida probate law attorney, and his impressive track record for skillfully handling even the most challenging cases informs every case he ably handles. We’re here for you, too, so please don’t put off reaching out for more information by contacting us online or giving our firm a call at 561-658-1789 today.