Distribution of an IRS Return for a Deceased Person
We are the identified executors for the deceased and are about to file the final Income Tax for them. They are to get a refund of less than $500.00. The Estate was insolvent and many debts were left. The funeral expense was paid out of some insurance but mostly by us. We need to know how to distribute the refund. Should we use it against our expenses incurred by the funeral or pay it against one of the debts and if so how do we determine which one (the debt load is greater than $35,000 - mostly on four credit cards)?
Thank you.
1 Answer from Attorneys
Re: Distribution of an IRS Return for a Deceased Person
Florida Statute section 733.707 describes the order in which expenses and debts are to be paid out of the estate. Each class must be paid before moving to the next class. by your description, the refund would probably be consumed by the Class 1 administration expenses (including personal representative and attorney fees). The next class, Class 2, includes funeral and grave marker expenses up to $6,000. Class 3 is debts and taxes with a federal preference (generally medicaid and other public assistance recovery). Then Class 4 is the reasonable and necessary nedical expenses for the last 60 days before death. The last class, Class 8 incudes all other claims (debts). Each class must be satisfied before moving to the next class. If there are not enough assets in the probate estate to pay the entire class, the debts of that class are to be paid ratably in proportion to the claims filed. From the little information given, I do not immediately see that there will be anything left to pay the general creditors (Class 8) so this should not be a concern.
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