Growing up, you may have had a loved one that was always buying new items. You did not think too much about his or her financial situation as it was well known that your family member was wealthy. This person may have even been a parent of yours, and you may have reaped the benefits of that wealth.
Now that your loved one has passed, you face the challenge of completing the probate process as the executor. Hopefully, you will have a working knowledge of your loved one’s financial situation, but unfortunately, you could end up in a situation where you learn that your family member had a considerable amount of debt. In fact, so much debt could exist that the estate is insolvent.
Insolvent estates are those that have more debt than remaining assets. As a result, executors will have to take the time to address remaining creditors and ensure that they handle those debts properly and in the correct order. If they do not, entire probate proceedings go off track.
It may come as a shock to you that your loved one was both wealthy and deep in debt. However, this type of scenario is not unusual. He or she may have made purchases with various types of loans, and now you hold the responsibility of repaying those debts with the remaining assets of the estate.
Though you may have other family members trying to get you to release assets to them because they want certain property from the estate, if you distribute assets too early and do not handle creditor claims in order of priority, you could end up holding financial liability. Therefore, you may need to make sure that you attend to priority claims in the following order:
- Paying costs of estate administration
- Paying funeral expenses
- Addressing debts and taxes that are considered a priority under federal law
- Covering medical expenses associated with the decedent’s last illness
- Paying debts and taxes considered a priority under state law
- Handling all other claims
Of course, you may want to remember that Nevada state law could impact the order of priority, and it may prove wise for you to consult with an attorney before distributing any assets from your loved one’s estate.