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Be Careful When Handling Insolvent Estates

When an estate is insolvent — meaning it has more debts than assets — the personal representative must be extremely careful in his or her management. Making payments to the wrong parties in the wrong amount or order can result in the personal representative being partially liable to creditors with unpaid claims.

When an estate's assets are insufficient to pay its debts and expenses, the Florida Statutes dictate a specific order in which claims are to be paid:

  • Costs of administration, fiduciary compensation and attorney fees
  • Reasonable funeral and burial expenses up to $6,000
  • Unpaid debts and taxes given preference under federal law and unpaid court costs
  • Medical expenses incurred within 60 days of death
  • Family allowance of up to $18,000 for spouse and dependent family members
  • Child support arrearages
  • Business debts acquired after death
  • All other debts

When the estate's assets are sufficient to pay some but not all debts in a given tier, the creditors on that tier each receive a pro rata share of whatever remains. The personal representative of such an estate must take care that creditors are paid in the proper order and that all administrative expenses are justified and well documented. Having the assistance of a seasoned Florida estate administration lawyer is a wise decision under these circumstances.

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