Handling Early Estate Expenses
Show Table of ContentsIn the early days of handling a death, an executor will often need to incur expenses before gaining access to official estate funds (for example, paying for the funeral, applying for probate, keeping the utilities on, etc.).
In such situations, you can:
While you will undoubtedly need to incur new expenses as you begin to care for and settle the estate, be careful about paying existing debts. It's best practice to go through the official state-specific debt process before paying any existing debts, and you could get yourself in trouble by paying things you shouldn't (see Financial Priorities). On the other hand, you will likely find it expedient or even necessary to pay certain debts immediately (such as bills for last month's electricity or lawncare, since you'll want these services to continue). If the estate turns out to be able to handle all its obligations, making such payments now will not be problematic, but choosing how to handle these situations will require judgment on your part: there's not always an easy, by-the-book answer.
Paying Out-of-Pocket
The simplest (and most common) approach to handling early expenses is to pay them yourself, and then repay yourself once you get access to estate funds.
While this approach generally works well, if the estate is insolvent, or close to it, people are sometimes reluctant to use their own funds out of concern they might never get repaid. In such cases, you may indeed want to be careful, but you can take some comfort in the fact that the law puts a priority on paying estate administration expenses, so repaying your legitimate out-of-pocket expenses would take priority over paying the decedent's existing credit card debt, for example.
Estate Loans
Another approach executors use to handle early expenses is to obtain a loan for the estate, and then pay the necessary expenses with those funds until access to other estate funds become available, and the loan can be repaid.
In fact, it is often the executors themselves that lend the estate the money, using their own funds. Such an executor loan is essentially similar to paying things individually out-of-pocket, with the obvious difference that it's one big out-of-pocket expense, rather than a lot of different smaller ones.
However, such a loan doesn't have to come from the executor. It can come from another, wealthier relative, or it can be a formal loan from a bank or other organization. Obviously, such formal loans involve more paperwork and the eventual payment of interest, but in certain circumstances, this may be the best approach.
Arrange for Providers to Wait for Payment
As you make new purchases on behalf of the estate, some providers may be willing to wait for payment once you explain the situation to them.
Depending on the situation, it may or may not be worth it to try for a delay, but keep in mind that such conversations may sometimes initiate broader awareness of the death than you are ready to handle, and may also trigger other unwanted reactions. For example, upon becoming aware of a death, insurers may want to immediately cancel a policy that you still want. On the other hand, insurance is a tricky subject, because some policies do in fact become invalid upon the policyholder's death, so a big claim triggered by something after the death could be problematic in any case.
Ignore the Situation
In truth, some bills can wait. Estates are generally protected by law and given a grace period after a death.
But life can be a lot easier if certain bills are paid, and given that you have a fiduciary duty to protect estate assets, you really want to ensure that necessary insurance policies (such as flood insurance) do not lapse, that mortgage payments stay reasonably current, that power bills are paid so that pipes don't freeze, etc.
Moreover, if you need to obtain services for the estate, you're likely going to have to pay for them now, not later. You can't just ignore things that you yourself are trying to arrange, such as getting a plumbing leak fixes, submitting an application for probate to the court, etc.
See Recording Early Expenses for instructions on using EstateExec to track such early expenses, and see also Estate Financials for a broader discussion of estate expenses and estate financials overall.