Which debts get paid first from an Ohio estate?

Losing a parent is burdensome enough without a mailbox full of “Final Notice” letters. If you are serving as a fiduciary handling an estate in Dayton, understanding which debts to pay first is essential to avoid personal liability.

Ohio law creates a strict priority system and requires you to pay higher-class creditors in full before you pay lower-class creditors anything.

The 10 classes of priority

In Ohio, the executor or administrator must pay each class of creditors in strict numerical order. You cannot pay any creditor in a lower class until all creditors in the preceding class are paid in full.

1. Costs of administration: Court fees and attorney fees necessary to administer and close the estate.
2. Funeral and burial: The estate may allocate a maximum of $4,000 for funeral director services and a maximum of $3,000 for burial and cemetery costs.
3. Family allowance: Ohio reserves a a $40,000 support allowance for a surviving spouse and/or minor children. Note: If minor children exist who are not the children of the surviving spouse, the court will apportion this amount.
4. Federal debts: This class includes taxes or money owed to the U.S. government.
5. Last illness expenses: These are reasonable medical bills specifically from the final illness.
6. Extra funeral costs: The estate may pay an additional $2,000 specifically toward the funeral director’s bill if those expenses exceeded the initial $4,000 limit.
7. Long-term care expenses: This covers any unpaid bills from the decedent’s final continuous stay in a nursing home, residential facility or long-term care unit in a hospital.
8. State and local debts: This class includes tax assessments on personal property, Medicaid recovery program demands and other obligations to the state or local government.
9. Manual labor: The estate may pay up to $300 to any one person for manual labor performed for the parent within the twelve months preceding their death.
10. General debts: This is where credit cards and personal loans wait.

If the estate exhausts its assets at Class 5, lower-priority creditors receive nothing from the probate assets. Ohio law treats this as an insolvent estate and discharges the remaining obligations, protecting the family from personal liability.

Avoiding personal liability for estate debts

Heirs rarely owe a parent’s debt personally unless you co-signed a loan, held a joint credit account or guaranteed nursing home costs. Note: Status as an ‘authorized user’ does not typically make you personally liable.

Paying debts out of order creates statutory risk. It constitutes an improper distribution and exposes the fiduciary to personal liability. Strict adherence to Ohio’s statutory order is the only way to protect your family’s legacy and your personal assets.