Death and Insolvency in a Pennsylvania Estate

Given the state of today’s economy we find that more and more people die with insolvent estates.  Sometimes it is because the decedent had little to no cash or liquid assets and own real property where the mortgage exceeds the fair market value of the property.  Other times, a Pennsylvania estate can be insolvent because the deceased person has credit card debt or medical bills that exceed the value of their assets.

In PA, if the applicable assets of the estate are insufficient to pay the claims of the estate in full, the executor or administrator can, subject to any preference given by law to claims due to the United States (for example, money owed for federal income taxes), shall pay the below creditors without priority as between claims of the same class in the following order:

(1)  The costs of administration.

(2)  The family exemption.

(3)  The costs of the decedent’s funeral and burial, and the costs of medicines furnished to him within six months of his death, of medical or nursing services performed for him within that time, of hospital services including maintenance provided him within that time, of services provided under the medical assistance program provided within that time and of services performed for him by any of his employees within that time.

(4)  The cost of a gravemarker.

(5)  Rents for the occupancy of the decedent’s residence for six months immediately prior to his death.

(5.1)  Claims by the Commonwealth and the political subdivisions of the Commonwealth.

(6)  All other claims.

Because a personal representative can be personally liable if they pay creditors or make any distributions prior to ascertaining whether an estate is insolvent, it is best that the personal representative consult a probate attorney experienced in dealing with estates that have many creditor issues.  The estate attorneys at Maloles Law, LLC are often consulted prior to a Will being offered for probate or prior to submitting a Petition for Letters of Administration with the Register of Wills to  help the named personal representative determine whether or not to open a decedent’s insolvent estate.

The estate attorneys at Maloles, LLC are experienced in handling insolvent estates in counties such as Philadelphia, Bucks, Montgomery, Lehigh, and Northampton.  For more information, contact the probate attorneys at Maloles Law, LLC.

 

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