When someone passes away there’s often confusion about how their assets get distributed. Many people assume that whatever is written in the will automatically determines who gets what and when. But the reality is a bit more complicated than that. As someone who’s helped many families navigate this process I want to clarify exactly who pays out money from a will and in what order this happens.
The Executor: The Person in Charge of Distributing Assets
First things first – the executor (sometimes called a personal representative) is the person responsible for paying out money from a will. This person is typically named in the will itself and is entrusted with handling the deceased’s financial matters.
But here’s the thing – executors can’t just start writing checks to beneficiaries right away. They must follow a specific order of payments according to state probate laws.
Probate: The Process That Controls How Money Gets Paid Out
For many of us, the will is the last word on who gets what when someone dies. But whether someone dies with a will or not (called “intestate”), state probate laws say how the money should be spent.
Probate is the legal process of distributing assets, paying debts, and finalizing affairs of someone who has died. While a will specifies who inherits assets, it rarely discusses how an executor should pay debts, funeral costs, or taxes.
The executor must submit the will through probate court, which reviews and validates it. Only then can the executor legally begin transferring assets—but only after settling taxes and debts.
The Order of Payment: Who Gets Paid First From an Estate
Here’s the general priority for payments from an estate, though specific rules may vary slightly by state:
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Funeral and Burial Costs: The estate has to pay for the funeral, burial, or cremation. Some states put limits on these costs, so executors should know what those limits might be.
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Administrative Costs This includes court fees legal fees, executor payments and other costs associated with managing the estate.
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Family Allowance In some states, surviving spouses and dependents can petition the court for a portion of the estate during probate. This acknowledges that the family may struggle financially after losing the deceased’s income.
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Taxes: The estate of the person who died must file their final tax return and pay any income taxes, property taxes, and estate taxes that are due.
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Medical Bills: Medical expenses from the deceased’s final illness are prioritized over other unsecured debts.
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Secured Debts: Mortgages and car loans have specific assets tied to them as collateral.
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Unsecured Debts: Credit card bills, personal loans, and other unsecured debts are paid after the above expenses.
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Beneficiaries: The will says that beneficiaries get their inheritance after all debts and costs are paid.
What About Mortgages?
Mortgage debt gets special treatment. Because of the contractual nature of a mortgage, the mortgage company has the right to foreclose on the property if payments aren’t made.
In practice, this means mortgage companies often become the #1 entity to get paid because they can foreclose if payments stop. If the home is sold, the mortgage company gets paid at closing, and remaining proceeds go to the estate.
When There’s Not Enough Money to Go Around
Sometimes a person dies with more debts than assets. In this case, their estate is considered “insolvent.” When this happens:
- No heirs will receive distributions because creditors’ claims have higher priority
- The executor must sell all non-exempt assets to pay debts in the legally required order
- Some creditors may receive partial payment or nothing at all
- In most cases, family members are NOT responsible for the deceased’s debts (unless they were co-signers)
One important warning: if the executor pays out from the estate in the incorrect order, they can be held personally responsible for debts! This is why many executors seek legal counsel to ensure they’re making payments properly.
How Do Beneficiaries Eventually Receive Their Money?
After all debts have been paid, the remaining assets (minus probate fees) are finally distributed to beneficiaries according to the will. If there is no will, distribution follows the state’s laws of succession.
The distribution process typically works like this:
- The probate court reviews and authorizes the will
- An executor is appointed
- The executor pays all debts and taxes
- The executor distributes remaining assets to named beneficiaries
Can an Executor Get Paid During Probate?
Yes, executors can typically be paid for their work. Some states allow payment throughout the probate process, while others may hold fees until the end to ensure there are sufficient funds to pay all debts and taxes.
Executors can also usually get reimbursed for reasonable expenses they incur while managing the estate.
What If the Executor Refuses to Pay You?
If you’re a beneficiary and the executor refuses to pay you, you have options. The executor has a legal responsibility to the estate and its beneficiaries. You can hold them accountable through the probate court if necessary.
What About Non-Probate Assets?
It’s important to note that not all assets go through probate. Certain assets pass directly to beneficiaries outside of the will and probate process:
- Life insurance policies with named beneficiaries
- Retirement accounts with designated beneficiaries
- Property held in joint tenancy
- Assets held in trusts
These assets typically transfer more quickly and aren’t subject to the same payment priorities.
Small Estates: A Simpler Process
Some estates don’t have to go through full probate if they meet a state’s small estate exemption or if all assets are non-probate assets. In these cases, the payment priorities may not apply in the same way.
Practical Tips for Executors
If you’ve been named as an executor, here are some practical tips:
- Notify creditors of the deceased’s death according to state requirements
- Keep meticulous records of all income and expenses
- Don’t pay heirs until all debts and taxes are settled
- Consider consulting an attorney to ensure you’re following proper procedures
- Be patient – the probate process often takes months or even years
When to Seek Professional Help
The process of paying out money from a will can be complicated. If you’re an executor and feeling overwhelmed, consider seeking help from:
- An estate attorney
- A financial advisor with estate expertise
- A professional executor service
Final Thoughts
Understanding who pays out money from a will is crucial whether you’re planning your own estate or serving as an executor. The process isn’t as simple as just “doing what the will says” – there’s a legally defined order of operations that must be followed.
By following the proper procedures, executors can ensure that debts are paid and beneficiaries receive their inheritances correctly, avoiding potential personal liability and family conflicts.
Remember, state laws vary significantly, so it’s always a good idea to consult with a legal professional familiar with your state’s specific probate laws when dealing with estate matters.
Have you had experience serving as an executor or receiving an inheritance? What challenges did you face in the process? I’d love to hear your experiences in the comments below!
How Do I Leave An Inheritance That Won’t Be Taxed?
FAQ
How do beneficiaries receive their money?
Most of the time, beneficiaries get their money through direct deposits or checks for assets given out by a will or trust, or through structured payments over time as set out in a trust or annuity. The specific method depends on the type of account (will, trust, or retirement plan), the asset involved (cash, property, or investments), and the terms set by the deceased. The executor or trustee manages the process, which involves notifying beneficiaries, paying off debts, and distributing assets, and the time frame can vary from months to years.
How does a beneficiary get money from a will?
General – a general gift tends to be a sum of money. Where should the general gift come from if the Will doesn’t say? It can come from money that is still in bank accounts. Alternatively, assets may need to be sold so the beneficiary can receive their inheritance.
Who disburses money from a will?
Once the creditors are paid, the executor has a responsibility to distribute the assets in accordance with the estate’s beneficiaries.
Does the executor of a will inherit everything?
This means that executors cannot ignore the asset distribution in the will and take everything for themselves. However, if the executor of the will is also the only beneficiary named in the will, they can take the estate assets after debts and taxes are paid.
Who is responsible for guiding a will through probate?
This legal procedure validates a will, appoints someone to manage the estate, pays off outstanding debts, and distributes the remaining assets to the beneficiaries named in the will. The person responsible for guiding the will through probate is the executor, who is named in the will and formally approved by a probate court judge.
What does an executor do in a will?
The person named in a will as executor (sometimes called a personal representative or an administrator if appointed by the court) must collect and protect the estate’s assets. They must then pay off the estate’s debts and taxes and then give any remaining assets to the beneficiaries, after the creditors have been paid.
Do debts and taxes get paid first in probate?
To ensure that important debts and taxes do get paid, state probate laws define exactly which payments get made first. That way, the executor doesn’t distribute funds to heirs and then runs out of money to pay creditors.
How are assets distributed in a will?
Distributing assets to beneficiaries After all debts have been paid, an estate’s remaining assets — minus any probate feeds — are distributed to beneficiaries in accordance with the will, or — if there is no will — by following a state’s laws of succession, otherwise known as the “order of heirs.” How does will money get distributed?
What does a will cover in probate?
A will seldom covers the details of how an executor will settle debts, pay for funeral expenses, or pay taxes, even though it may name who will inherit certain assets or the value of the estate. State probate laws specify precisely which payments get made first in order to guarantee that significant debts and taxes are paid.
Can an executor pay a debt?
Executors can pay most ordinary bills. If the estate passes through probate, creditors must submit formal written claims, typically within a four-to-six-month window. In estates with limited liquid assets, executors may need to sell other assets to pay debts.