Understanding the Hierarchy of Creditor Payouts in Probate

Chances are that you are at the very least familiar with the word, probate. But there’s a much greater chance that you do not understand the probate process. Don’t worry, you’re not alone. Recent studies show that most people do not understand the process and are unaware of the costs, duration, and complexities involved in probate.

Very simply, probate is a legal process that an estate typically goes through when someone passes away. One of the more crucial aspects of probate is settling the deceased person’s debts. Before any inheritance is distributed to heirs, outstanding debts must be paid. To ensure fairness, there is a legally established hierarchy for how creditors are paid. Below is how the priority of payout is for Georgia (as detailed in GA Code § 53-7-40).

At the top of this hierarchy would be the funds and assets awarded by the Court under a Petition for a Year’s Support to the family.

Next are funeral and burial expenses.  These are often capped by state laws but are generally given high priority to ensure respectful handling of the deceased.

After funeral and burial expenses, other administrative expenses are to be paid, which include court fees, attorney fees, and executor compensation. These are necessary to manage and settle the estate.

Following that are medical expenses related to the last illness and unpaid taxes, including state and federal income taxes and estate taxes.

Next come judgements, liens, and secured debts, such as mortgages or car loans. The liens are to be paid according to their priority of lien.  The secured debts and liens are often tied to specific assets and shall receive preferred payment only to the extent of such property, which can be repossessed or sold to satisfy the debt.

Finally, unsecured debts—like credit card balances, personal loans, or utility bills—are paid. If the estate lacks sufficient funds, these creditors may receive only partial repayment or nothing at all.

Only after all debts and expenses are settled can any remaining assets be distributed to beneficiaries. Understanding this hierarchy is vital for executors and heirs, as it ensures the legal and orderly resolution of the estate.

What many people do understand is that avoiding probate, which can be costly and time-consuming, is something to avoid if possible. One way to avoid that is by establishing an estate plan that includes a revocable living trust. If you would like to learn more about avoiding probate and establishing an estate plan, give my office a call today at (470) 235-7865.

Looking to find an experienced estate lawyer in the Georgia area who is skilled in asset protection and estate plan preparation? Shannon Pawley is an attorney in Georgia with expertise in estate planning and asset protection. Shannon can provide assistance with creating an estate plan to include making a will and how to establish a trust properly. If you have questions about asset protection or questions about making an estate plan, reach out to Shannon and she will be glad to help answer all the estate planning questions you might have!