General Provisions - Payment Of Debts - Probate - CA

Section § 11420

This law outlines the order in which debts must be paid when settling an estate. First priority goes to administration expenses related to property secured by a mortgage or lien. Then, obligations secured by a mortgage or lien are next, followed by funeral and last illness expenses, family allowances, wage claims, and finally, general debts. If there isn't enough money to cover all debts in a category, those debts share the available funds equally. Federal or state laws might change this order if they give preference to certain debts.

(a) Debts shall be paid in the following order of priority among classes of debts, except that debts owed to the United States or to this state that have preference under the laws of the United States or of this state shall be given the preference required by such laws:

(1) Expenses of administration. With respect to obligations secured by mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, only those expenses of administration incurred that are reasonably related to the administration of that property by which obligations are secured shall be given priority over these obligations.

(2) Obligations secured by a mortgage, deed of trust, or other lien, including, but not limited to, a judgment lien, in the order of their priority, so far as they may be paid out of the proceeds of the property subject to the lien. If the proceeds are insufficient, the part of the obligation remaining unsatisfied shall be classed with general debts.

(3) Funeral expenses.

(4) Expenses of last illness.

(5) Family allowance.

(6) Wage claims.

(7) General debts, including judgments not secured by a lien and all other debts not included in a prior class.

(b) Except as otherwise provided by statute, the debts of each class are without preference or priority one over another. No debt of any class may be paid until all those of prior classes are paid in full. If property in the estate is insufficient to pay all debts of any class in full, each debt in that class shall be paid a proportionate share.

estate debts debt priority estate administration ...

Section § 11421

This law explains that once a personal representative, like an executor, has enough money in a deceased person's estate, they must first put aside cash to cover administrative expenses. After that, they need to pay for funeral costs, the deceased person’s final medical expenses, any family support payments, and outstanding wage claims.

Subject to Section 11420, as soon as the personal representative has sufficient funds, after retaining sufficient funds to pay expenses of administration, the personal representative shall pay the following:

(a) Funeral expenses.

(b) Expenses of last illness.

(d) Wage claims.

personal representative duties paying funeral expenses final medical expenses ...

Section § 11422

The law states that a personal representative handling someone’s estate cannot pay off the deceased's debts until a court gives the go-ahead, except in certain situations mentioned in another section. After four months from starting their role, the court will instruct how debts should be paid, depending on the estate’s resources. If there isn’t enough money to cover all debts, the court will dictate how much each creditor gets. If paying the debts drains the estate, the process ends, and the personal representative is discharged from their duties once they fulfill these payments. However, it's possible for debts to be settled without court orders if nothing in this section explicitly forbids it.

(a) Except as provided in Section 11421, the personal representative is not required to pay a debt until payment has been ordered by the court.

(b) On the settlement of any account of the personal representative after the expiration of four months after the date letters are first issued to a general personal representative, the court shall order payment of debts, as the circumstances of the estate permit. If property in the estate is insufficient to pay all of the debts, the order shall specify the amount to be paid to each creditor.

(c) If the estate will be exhausted by the payment ordered, the account of the personal representative constitutes a final account, and notice of hearing shall be the notice given for the hearing of a final account. The personal representative is entitled to a discharge when the personal representative has complied with the terms of the order.

(d) Nothing in this section precludes settlement of an account of a personal representative for payment of a debt made without prior court authorization.

personal representative duties estate debt payment court-ordered payments ...

Section § 11423

Interest builds on a debt from the moment a court orders it paid until it's completely settled. Typically, this interest follows the legal judgment rate. However, if the debt comes from a written contract, the contract's specified interest rate applies. The court can allow the executor to pay any or all overdue interest when funds are available. For debts like unpaid taxes or those defined by law, the statutory interest rate is used instead.

(a) Interest accrues on a debt from the date the court orders payment of the debt until the date the debt is paid. Interest accrues at the legal rate on judgments.

(b) Notwithstanding subdivision (a), in the case of a debt based on a written contract, interest accrues at the rate and in accordance with the terms of the contract. The personal representative may, by order of the court, pay all or part of the interest accumulated and unpaid at any time when there are sufficient funds, whether the debt is then due or not.

(c) Notwithstanding subdivision (a), in the case of a debt for unpaid taxes or any other debt for which interest is expressly provided by statute, interest accrues at the rate and in accordance with the terms of the statute.

interest on debt court-ordered payment legal rate ...

Section § 11424

If someone is in charge of handling the financial affairs of a deceased person (the personal representative), they have to pay off any debts according to the court's instructions. If they don't make these payments, they can be personally held responsible and might also be liable under a bond, if one exists.

The personal representative shall pay a debt to the extent of the order for payment of the debt, and is liable personally and on the bond, if any, for failure to make the payment.

personal representative duties debt payment responsibility personal liability ...

Section § 11428

When an estate is ready to be closed, but there's a debt that can't be paid because the creditor can't be found, the court will order the estate's executor to deposit the payment with the county treasurer. The county treasurer gives a receipt that holds the same legal weight as if the creditor signed it. This deposited money is handled according to other legal sections, specifically Section 1444 of the Code of Civil Procedure, and if deposited in the State Treasury, it's managed under Article 1 of another part of the Code of Civil Procedure.

(a) If an estate is in all other respects ready to be closed, and it appears to the satisfaction of the court, on affidavit or evidence taken in open court, that a debt has not been and cannot be paid because the creditor cannot be found, the court or judge shall make an order fixing the amount of the payment and directing the personal representative to deposit the payment with the county treasurer of the county in which the proceeding is pending.

(b) The county treasurer shall give a receipt for the deposit, for which the county treasurer is liable on the official bond. The receipt shall be treated by the court or judge in favor of the personal representative with the same force and effect as if executed by the creditor.

(c) A deposit with the county treasurer under the provisions of this section shall be received, accounted for, and disposed of as provided by Section 1444 of the Code of Civil Procedure. A deposit in the State Treasury under the provisions of this section shall be deemed to be made under the provisions of Article 1 (commencing with Section 1440) of Chapter 6 of Title 10 of Part 3 of the Code of Civil Procedure.

estate closure unpaid debt missing creditor ...

Section § 11429

Once an estate's personal representative's accounts are settled and the court orders the payment of the debts and distribution of the estate, any unpaid creditor cannot demand money from those creditors who were paid or from those who inherit the estate, unless another law (Section 9392) allows it.

However, unpaid creditors may still have the option to go after the personal representative directly or their bond, based on another law (Section 9053).

(a) Where the accounts of the personal representative have been settled and an order made for the payment of debts and distribution of the estate, a creditor who is not paid, whether or not included in the order for payment, has no right to require contribution from creditors who are paid or from distributees, except to the extent provided in Section 9392.

(b) Nothing in this section precludes recovery against the personal representative personally or on the bond, if any, by a creditor who is not paid, subject to Section 9053.

unpaid creditor estate distribution personal representative ...