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Payment of Debts

From the proceeds of the deceased's estate the executor must pay, in the following order:

  • the funeral expenses
  • the testamentary (legal) expenses
  • any statutory obligations (such as taxation)
  • any other debts.

This priority of payment is also followed when a person dies leaving more debts than assets.

Before the assets of the deceased's estate can be distributed to beneficiaries, the funeral expenses may have to be paid. The person who orders the funeral is responsible for paying the account but is entitled to be repaid for the reasonable cost of the funeral before other creditors are paid . A testator often says in the will how the funeral expenses are to be paid.

Creditors of an estate must wait until the assets of the estate are available to the executor or administrator and reasonable funeral and testamentary expenses are paid before they may receive payment.

The will usually states which part of the estate must be used to pay the debts, including the funeral expenses. Usually the residuary estate (those assets not specifically left to a particular person) is used for this purpose. If the residuary estate is insufficient to pay the debts, other specific gifts in the will may be used to bear these costs proportionately. There is a particular order for payment of debts in these circumstances.

Payment of Debts  :  Last Revised: Wed May 5th 2004
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.