Should Executors Pay Estate Bills Right Away – or Wait?
We highlight a critical, but often misunderstood aspect of estate administration:
The risks of executors or administrators rushing to pay bills or distribute assets after a loved one passes away.
Drawing on insights from an estate attorney, Tom outlines common issues such as creditor prioritization, potential liability of executors, and complications from partial distributions.
The focus of the video is on awareness, rather than solutions.
Viewers will gain an understanding of why estate administration requires careful attention and patience.
Takeaways:
- Don’t rush to pay creditors after a death – order of payment matters.
- Executors could face personal liability for premature or improper payments.
- Partial distributions may create problems if new debts surface later.
- Estates could remain open far longer than most people expect.
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Link to Jenny Rozelle’s thread on Twitter (X)
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Transcript for “Should Executors Pay Estate Bills Right Away – or Wait?”
There’s a great thread on Twitter running the last few days. We’ll link to it in the show notes. It’s from a friend of the firm, estate attorney, Jenny Rozelle.
She started out the conversation by saying, “if someone close to you passes away, here’s one of the most important things to know. Don’t be in a rush to pay their bills.”
Yes. Even if the bills start really piling up. Even if it “feels like” it’s the right thing to do, don’t be in a hurry to pay these bills.
She recommends speaking with an attorney.
And I think that makes good sense.
Because paying debts too early could create some problems.
Problems that you didn’t intend to create.
And problems that you may not be able to undo.
Even if these creditors are sending multiple requests for payments… just slow it down a little bit.
Even if they’re threatening to send things to collections.
Just take your time with this.
Jenny mentioned that she’s seen estates where there are more debts than assets.
If that happens, there’s usually a very specific order for who gets paid first, and in what order.
Because not all debts are treated equally when it comes to an estate.
You pay the wrong creditor too soon… and you could:
Number one, you could reduce what’s legally owed to other higher priority creditors.
Second point, you’re exposing yourself… and the executor, if that’s not you, to (potential) personal liability.
And three, you could actually, accidentally, waive protections that the estate has.
One of the most important lines that we saw in that thread was a great one, and we’re going to repeat this over and over to folks:
Estate administration is not about being fast.
It’s about being correct.
I thought that was a gem.
And again, we’ll link to this in the show notes.
So don’t be in a hurry to pay debts of someone who has recently passed away.
Don’t be in a hurry to pay out the estate.
Even doing partial distributions, uh, things can go wrong.
Things can pop up that, you didn’t anticipate.
Don’t be in a hurry to close the estate.
We’ve seen situations where executors have made partial payouts in estates, and then some type of debt pops up four months later, eight months later, twelve months later.
We’ve had an estate that lasted for 20 years.
They tend to hang around.
We’ve also run into folks who want to open an estate account on Monday and close it on Thursday.
It doesn’t work that way.
These things take time.
You need to really proceed carefully and not be in a hurry to pay down debt and distribute all the assets.
Can you do partial distributions?
Of course, if everybody’s on the same page and there’s an agreement.
But we’ve seen situations where. after someone passes away, six months later, eight months later, twelve months later, a bill for an ambulance ride comes up.
Or, there’s a bill from the hospital.
There’s statements coming in from Medicare or Medicaid.
Be very, very careful.
Take your time paying these bills.
There’s also a fine line between folks who do the… perform the… unauthorized practice of law.
A financial planner? An accountant?
A friend of yours who read a John Grisham book?
These are not people who are certified to be, uh, giving you legal advice.
So yes, you’re going to spend some money.
Talk to an estate planning attorney, get it done right.
It’s not about being fast, it’s about doing it right.
Thanks for watching “Should Executors Pay Estate Bills Right Away”
