Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
When administering an estate in Alabama, an executor must ensure the estate holds sufficient funds before settling any creditor claims. This duty protects the executor from personal liability and ensures that debts are paid in the proper order under Alabama law.
First, the executor must inventory and appraise all estate assets. Under Ala. Code § 43-2-362, the executor files an inventory listing real and personal property. This step establishes a clear picture of available funds.
Next, the executor must publish a notice to creditors as required by Ala. Code § 43-2-380. Creditors typically have six months from notice publication to present claims. During this period, the executor tracks incoming claims and verifies their validity.
Before paying a claim, the executor confirms that the estate’s liquid assets—cash, bank accounts, and marketable securities—cover outstanding debts plus administrative expenses. Under Ala. Code § 43-2-371, valid creditor claims are paid in the following order:
- Expenses of administration (including funeral expenses and attorney fees).
- Secured claims to the extent of the collateral’s value.
- Unsecured claims.
- Claims with statutory preference (e.g., certain taxes).
If the estate lacks sufficient funds to pay all valid claims, the executor must:
- Notify the probate court of the shortfall.
- Distribute funds according to the statutory priority list.
- Avoid paying lower-priority claims ahead of higher-priority debts.
Confirming available funds prevents the executor from overpaying claims, breaching fiduciary duties, or facing personal liability for unpaid debts.
Helpful Hints
- Maintain a detailed asset inventory and update it as assets are collected.
- Use estate bank accounts exclusively for receipts and disbursements to track balances easily.
- Review each creditor claim for validity and statutory deadlines before payment.
- Record every payment with date, amount, payee, and source of funds.
- Consult with a probate attorney if complex assets or creditor disputes arise.