Legal Question in Wills and Trusts in New Jersey
How are the Estate debts paid.
Are the Estate debts paid from the residuary? Is the term ''Expenses'' considered the same as Debt of the Estate? and does this statement fall into the category of ''Special Bequests'' : I give all of my personal property, wherever located, together with any insurance policies relating thereto, to my spouse ______.
2 Answers from Attorneys
Re: How are the Estate debts paid.
Generally, estate debts are paid from the residuary, but I would need to review the terms of the will to be certain.
Expenses are not exactly the same as debts, but are also commonly paid from the residuary estate.
"Special Bequests" are not debts or expenses.
Expenses are typically such things as real estate taxes and maintenance costs, executors commissions, accounting and legal fees, etc.
Re: How are the Estate debts paid.
Depends where in the Will the language regarding payment occurs. If at the outset of the Will, they traditionally are paid from the gross assets of the probate estate before specific bequests and the residuary. If the residuary has sufficient assets to cover debts, expenses (these include funeral and funeral related items, mortgages, liens, open bills and the like, etc.), then they are paid by the residuary and any specific bequests get paid in full. However, if the residuary is insufficient to pay debts and expenses, they reduce the specific, pro-rata. The personal property language is like a specific bequest and gets distributed, provided that liquidation value is not needed to pay debts and expenses.
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