Do Creditors Get Paid When Someone Dies?

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When someone dies, the Internal Revenue Service (IRS) takes its cut of the money first, followed by funeral expenses, then creditors and finally heirs. Learn about handling creditors and debt when someone dies from an estate planning and probate lawyer in this free video on estate law.

Part of the Video Series: Estate Planning
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Video Transcript

Most people think that the probate process or frankly the revocable living trust administration process when somebody has passed away, is all about getting the money to the family. Let me assure you that is partially true, but not at all entirely true. The family gets paid last. The first group that gets paid, frankly, is the Internal Revenue Service. First in line, first in time, they want their money first. Second are typically the expenses of the last illness of the deceased, the funeral expenses of the deceased, the attorneys fees incurred in selling the estate of the deceased. Then all the people that the deceased owed money to. Mastercard gets paid, Visa gets paid, Sears Roebuck gets paid, the car note may get paid--the car may get sold. The house oftentimes can be--the current mortgage can be kept going. Sometimes it can be kept going on a car too. But if the creditor doesn't want to keep it going--if the creditor wants their money then they may be able to force the sale of that to get their money too. So debts are paid, taxes are paid, administrative expenses are paid, the funeral's paid, health care costs are paid, and then finally what's left can go to the heirs. And it's not unusual to find cases where there's no money to go to the heirs because it was all eaten alive by the creditors.

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