New York Probate and Estate Administration Lawyer Blog
he purpose of the estate administration process is to settle the outstanding affairs of a decedent. This includes ensuring that the debts that the decent left behind and the expenses related to the administration of their estate are paid. Debts may include household bills, car loans, credit card bills, and taxes. Expenses include those related to attorney fees and other administration fees as well as those related to the funeral and burial of the decedent.
In fact, debts and expenses must be paid by the administrator of the estate before assets are distributed to beneficiaries or heirs. Because estates do not always have sufficient assets to pay outstanding debt and expenses, New York law sets forth an order of priority for their payment. The expenses that are required to be paid first before any other expenses or debts are funeral and burial expenses. SCPA § 1811(1).
In Thompson, the decedent died intestate. The court appointed administrator of the estate was her daughter. She contracted with a funeral home for the funeral and burial of the decedent. The cost was $12,410.00, but the estate did not have sufficient assets to cover the bill and the bill went unpaid. However, there was a pending wrongful death action that was eventually settled. The total amount of the settlement is unclear, but of the settlement, the court ordered $25,560.13 in escrow with respect to the outstanding funeral bill. While the bill was initially $12,410.00, it had grown to $25,560.13 because of the 24% annual interest assessed for late payment.
The administrator objected to the bill, arguing that the interest was usurious under GOL § 5-501 and that the bill should be considered null and void. The court concluded that GOL § 5-501 does not apply because the agreement between the estate and the funeral home was not a loan, but a contract. The money in escrow was paid out to the funeral home.
Note that New York law restricts the amount that can be paid out of an estate for funeral expenses to “reasonable.” However, reasonable is not defined. Further, there is no restriction on a funeral home charging interest when a bill is not paid on time according to the agreed upon terms of the contract. Clearly, in this case the court felt that the funeral expenses were reasonable and that the funeral had the right to enforce the terms of the contract.
As the administrator, the daughter of the decedent had an obligation to preserve the estate and only pay just debt. As an heir, she also had a personal interest in minimizing the amount paid to the funeral home. She wanted the court to declare the bill void, for the funds to be released from escrow and distributed to the distributees. That would have meant that the money would have gone to her, her sister, and her niece.
Note that while in this case the decedent was intestate, the result would not have been any different had the decedent left a will. Funeral expenses, expenses of administration, and other debt must be paid prior to beneficiaries according to the statutory order of priority. The order or priority is as follows:
- Reasonable funeral expenses and administration expenses of the estate
- Any debt with a preference under the laws of the United States or the state of the estate, for example, federal or state income tax obligations
- Taxes assessed on the decedent’s property prior to death
- Judgments against the decedent
- Any other debts that may be owed by the decedent at the time of their death
If the estate does not have sufficient assets to pay these debts, it is not the obligation of the administrator to pay them out of their personal funds. Debts would be paid to the extent that there are assets in the estate to do so. Other debts simply would not get paid, and the decedent’s distributees would not receive anything.