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One question that is often asked is how
creditor claims are handled if there is insufficient money in the estate to pay
all of the claims. T.C.A. § 30-2-317 provides a list showing the priority for
any creditor claim against the estate of a deceased individual in Tennessee. Claims and demands against an estate are
divided into certain categories and the statue provides the order in which the
claims or demands are to be paid. T.C.A.
§ 30-2-317
provides the priority for claims against the estate as follows:
(a) All claims or
demands against the estate of any deceased person shall be divided into the
following classifications, which shall have priority in the order shown:
(1) First: Costs of
administration, including, but not limited to, premiums on the fiduciary bonds
and reasonable compensation to the personal representative and the personal representative's
counsel;
(2) Second:
Reasonable funeral expenses;
(3) Third: Taxes and
assessments imposed by the federal or any state government or subdivision of
the federal or any state government, including claims by the Bureau of TennCare
pursuant to § 71-5-116; and
(4) Fourth: All
other demands that may be filed as aforementioned within four (4) months after
the date of notice to creditors.
Category number four basically provides the
last layer of priority and is designed to account for all other possible
categories of creditors. This statute
also provides specific instructions to the personal representative of the
estate on how to pay the claims according to the priority found in this
statute. T.C.A.
§ 30-2-317(b)
provides as follows:
(b) All demands
against the estate shall be paid by the personal representative in the order in
which they are classed, and no demand of one class shall be paid until the
claims of all prior classes are satisfied or provided for; and if there are not
sufficient assets to pay the whole of any one class, the claims in that class
shall be paid pro rata.
It is very important for the
personal representative to be aware of the rules pertaining to the priority of creditor
claims. A personal representative can be
personally liable for claims that are not handled in the correct manner. Nobody wants to be in this situation. This is where an experienced probate attorney
can be very helpful to guide and advise the personal representative in this
process. Ignorance of the law does not
excuse a personal representative from the responsibilities of the law for the administration
of an estate.
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