Our loved ones draft wills and other financial documents related to their estate so that their assets will be passed on in the manner they wish. This probably means stating that some of the estate should be divided between family members and friends that they left behind. In some cases, an amount may be earmarked for a charitable organization.
However, it’s not quite as simple as looking over the decedent’s financial wishes and doling out money and other assets as desired. When an estate enters into probate, there is a period of time in which creditors can come forward with claims. After that period of time, the payments can start being distributed.
Not every claim is treated equally, though. In fact, Florida law outlines a specific order in which these claims must be paid. Below we are going to detail the order in which claims are paid as well as what these claims are used for and the laws that define them.
Order of Claims Paid
Class 1 Costs: The first claims that will be paid out include expenses for probate administration, compensation for the personal representative, and attorney fees. Compensation for the personal representative may be explained in the will. Otherwise, there are specific procedures and rules for how much a personal representative can be paid for their duties.
Class 2 Costs: You may be required to pay for funeral and burial services before probate even begins, but once class 1 costs are paid, you will be able to receive compensation. However, if you paid more than $6,000 for funeral, interment, or grave marker expenses, your luck will run out – Florida law only allows Class 2 costs to cover up to $6,000.
Class 3 Costs: Even in death, taxes and bills must still be paid. Class 3 costs cover “Debts and taxes with preference under federal law,” as well as claims relating to unpaid court expenses (fees, fines, etc.), and any debt accrued through using Medicaid or public assistance.
Class 4 Costs: If a decedent received medical care in the last 60 days of his or her life, this will be paid out next – but only if the costs are deemed “reasonable and necessary.” Any family members or spouses who attended to the decedent may also be compensated.
Class 5 Costs: Florida law requires a “family allowance” to be paid under Class 5. This is an amount of money set aside to maintain the care of the decedent’s surviving spouse and children. Family allowances are paid for up to one year after the decedent’s death.
Class 6 Costs: Any past due child support is called “arrears.” If the decedent has unpaid child support, that amount will be paid as a Class 6 costs, right after the family allowance is set aside or distributed.
Class 7 Costs: A decedent may have acquired debts through his or her business. These debts are paid next. However, these debts will not paid using the decedent’s personal assets. Rather, they can only be paid with assets owned or acquired by the business.
Class 8 Costs: All other claims are paid at this time.
All of these claims are usually paid with the decedent’s liquid assets, but other assets can be involved if liquid assets run out. If there are not enough assets to pay the claims in Classes 1-7, a personal representative may be able to pull assets from a revocable living trust in order to cover the necessary costs.
Once all of the claims are paid, the remaining estate and assets can be divided among family and the people that are mentioned in the decedent’s will.
What These Claims Mean for Benefactors, Personal Representatives, and Those Writing a Will
These claims are important for everyone to understand because you will be effected differently depending on yours status.
If you are a benefactor, it may take months for you to receive the assets left for you in a will. If you are a personal representative, you will need to keep track of all of the claims that you must pay, the order they need to be paid, and what you can use to pay them off. If you are writing a will, these claims are especially important to know, because you can make the probate process easier and faster by reducing the number of claims against you.
Pay off debt before you pass away to reduce the number of creditors coming to your personal representative’s door. Budget out your assets properly – for example, you may want to set up a revocable living trust solely for the purpose of paying off any other claims or debts that you acquire during your death.
Whether you are writing your will, getting ready to take on the role of a personal representative, or a beneficiary who is experiencing difficulties, the best way to help your situation is to get in contact with an experienced Florida probate lawyer.
About the Author:
Christopher Q. Wintter is the President of Wintter & Associates, P.A. , a four-lawyer trust and estate firm. Mr. Wintter is a Florida Bar Board-Certified Expert in Trust and Estate Law. With more than 28 years’ experience as a practicing attorney, he also serves as an instructor and faculty member for the National Institute of Trial Advocacy (NITA)—the nation’s leading provider of legal advocacy skills training to practicing attorneys—and has earned the AV® Preeminent™ rating with LexisNexis Martindale Hubbell. He was also selected for inclusion in Florida Super Lawyers Magazine for 2011, 2012, and 2014-2016 in Estate and Trust Litigation, and was selected for inclusion to the Best Lawyers in America in 2016.