What Happens If a Washington Probate Estate Runs Out of Money?
When a Washington resident dies, their probate estate is responsible for paying any debts or expenses left by the decedent. The personal representative (executor) of the estate must pay any valid creditor claims using the estate’s available assets. These payments take priority over any gifts or bequests made under the decedent’s will.
But what if there are simply not enough assets to pay all of the debts and expenses of the estate? In that case, the estate is considered insolvent. And who gets paid depends on a combination of state and federal law.
Washington’s Order of Payment of Debts
RCW 11.76.110 is Washington’s statute regarding the order of payment of debts by a probate estate. The statute provides that after paying any costs of administering the estate itself, debts must be paid in the following order:
- Funeral Expenses: This includes the costs of the decedent’s funeral, burial, cremation, and/or interment.
- Expenses of the Last Sickness: This includes the hospital and medical bills directly arising from the decedent’s final sickness or injury, not necessarily all of their unpaid health care bills.
- Wages Due for Labor: If the decedent owed any of their employees money for services performed within the 60 days before the decedent’s death, that takes priority.
- Debts Having Preference by Laws of the United States: This includes any taxes owed to the federal government, including the federal gift and estate tax, income taxes, et al.
- Taxes or Debts Owed to the State: This includes any Washington state or local taxes.
- Judgment Liens: This includes any civil judgments issued against the decedent before their death that constitutes a lien on real property, as well as any debts secured by a mortgage.
- All Other Demands: Any other unsecured debts owed by the decedent, such as unpaid credit card bills or personal loans.
There is actually a conflict between Washington State and federal law. A federal statute, 31 USC § 3713, provides that a “claim of the United States Government shall be paid first” by the insolvent estate of a deceased debtor. According to a 1959 Washington Supreme Court decision, In re Shoptaw’s Estate, this means that federal tax debts take priority over the expenses of the decedent’s last sickness.
With that caveat, in the event of an insolvent estate, creditors in a higher class must be paid before any creditors in the lower classes. In other words, funeral expenses must be paid first. If there is anything left, then the creditors of the next-highest class are paid. If the estate runs out of assets before paying all of the creditors in a given class, whatever is available must be divided pro rata among those creditors in that class. Any creditors in the lower classes receive nothing.
Contact a Spokane Probate Lawyer Today
Settling a Washington estate can often be an overwhelming process for the family members of the deceased. A qualified Spokane probate lawyer can walk you through the process and advise you on any legal requirements. Contact Moulton Law Offices, P.S., today to schedule a free consultation. We serve clients throughout Spokane Valley, Kennewick, and Yakima.
Source:
apps.leg.wa.gov/RCW/default.aspx?cite=11.76.110
