Order of Paying Estate Debts in New York: SCPA § 1811

A New York executor pays the decedent's debts in the order set by Surrogate's Court Procedure Act (SCPA) § 1811, not in the order the bills arrive and not in the order the family prefers. Funeral expenses come first, subject to administration expenses. After that, the statute lists four classes of debts, and the executor works down the list. When there is enough money to pay everyone, the order rarely matters. When there is not, the order decides who gets paid, and paying out of order can leave the executor answering for the difference.

What does SCPA § 1811 require an executor to do?

SCPA § 1811 requires the executor to pay the decedent's debts with diligence and in a fixed statutory order. The same section applies to an administrator appointed when there is no will, because it speaks of every "fiduciary".

The full text of the section is published on the New York State Senate's Open Legislation site. The duty belongs to the fiduciary appointed by the Surrogate's Court, such as the New York County Surrogate's Court in Manhattan. If you have not yet been appointed, our guide to letters testamentary in Manhattan Surrogate's Court covers that first step.

Where do funeral and administration expenses fall?

Reasonable funeral expenses are paid before every debt of the decedent, but they rank behind the expenses of administering the estate. SCPA § 1811(1) states the rule in one sentence.

Two phrases in that sentence carry weight. The word "reasonable" means a funeral bill can be questioned if it is out of line with the estate. The phrase "subject to" means the expenses of administering the estate itself sit above the funeral bill. In a small estate, those two categories can use up most of the cash before any creditor of the decedent sees a dollar.

What is the order of the four classes of debts?

After funeral and administration expenses, SCPA § 1811(2) sorts the decedent's debts into four classes, paid in this order:

1. Class (a): "Debts entitled to a preference under the laws of the United States and the state of New York".
2. Class (b): "Taxes assessed on property of the deceased previous to his death".
3. Class (c): "Judgments docketed and decrees entered against the decedent according to the priority thereof respectively".
4. Class (d): "All recognizances, bonds, sealed instruments, notes, bills and unliquidated demands and accounts".

Class (d) is where most everyday debts land: credit cards, medical bills, personal loans, and unpaid accounts. It is also the class most likely to go unpaid in a small estate, because it comes last.

Debts preferred under federal and state law

Class (a) points outside the SCPA to other statutes that give certain creditors a preference. The most important for executors is the federal priority statute, 31 U.S.C. § 3713, which puts claims of the United States first when an estate cannot pay everyone.

The official text is on govinfo.gov.

Pre-death property taxes

Class (b) covers taxes assessed on the decedent's property before death. SCPA § 1811(2)(b) adds a rule that matters when real estate goes to a specific person: real property taxes the executor pays on property passing to a distributee or devisee become "a charge thereon for which the beneficiary must reimburse the estate unless in the case of wills the testator has indicated expressly or by necessary implication that such taxes be otherwise paid". In plain terms, the person who receives the house may have to pay those taxes back to the estate unless the will says otherwise.

Judgments and everything else

Class (c) is the one class with an internal ranking: judgments docketed and decrees entered against the decedent are paid "according to the priority thereof respectively". Class (d) has no internal ranking at all, as the next section explains.

Can an executor pay one creditor ahead of another in the same class?

No. SCPA § 1811(3) bars preferring one debt over another in the same class, with class (c) as the only exception.

The same subdivision closes off the usual ways a creditor tries to jump the line:

• A debt that is already due gets no edge: "[a] debt due and payable shall not be entitled to a preference over debts not due".
• Suing the executor does not help. Starting a suit or "the obtaining of a judgment thereon against the fiduciary shall not entitle this debt to preference over others of the same class".
• The executor's own claim gets no edge: "[a] debt or claim of the fiduciary shall not have preference over others of the same class", although a fiduciary whose claim is secured by collateral may apply to the court for leave to surrender the collateral and be paid on conditions the court sets.
• Rent is the one discretionary exception. The court may prefer rent due or accruing on the decedent's leases over class (d) debts "if it appears to the court's satisfaction that such preference will benefit the estate of the decedent".

An executor who is also a creditor faces one more limit. Under SCPA § 1805(1), a fiduciary "shall not pay out of the property of the decedent any debt alleged to be owing to him by the decedent until proved and allowed by the court in the proceeding for the judicial settlement of his account". SCPA § 1805(2) lets the fiduciary petition earlier for permission to pay that debt.

What happens if the estate is insolvent?

When the estate cannot pay every debt, the statutory order controls who is paid: each class is reached only in the order SCPA § 1811(2) lists, and within a class no creditor may be preferred over another. Creditors in the last class reached usually share what is left without any one of them being favored, and creditors in later classes may receive nothing.

Secured creditors are treated differently in an insolvent estate. Under SCPA § 1811(4), their dividends are figured only on the part of the claim the collateral does not cover:

A secured lender can therefore choose: keep the collateral and claim a dividend on the shortfall, or surrender the collateral and claim on the full face amount.

Is the executor personally liable for paying debts out of order?

Yes, an executor can end up personally responsible for paying debts out of order, and the clearest example is the federal priority rule. 31 U.S.C. § 3713(b) makes the representative answer personally for federal claims left unpaid:

New York law adds its own exposure through the accounting. Under SCPA § 1807(1), if a claim "was improperly allowed or was fraudulently or negligently paid", any party adversely affected may object when the executor's account is judicially settled, and the court may order the creditor to repay and "may, in addition, impose a surcharge against the fiduciary or otherwise as justice shall require". Our guide to accounting proceedings for New York fiduciaries explains how objections are raised and decided.

The seven-month protection and its limits

SCPA § 1802 gives the executor some protection against late creditors. If a claim is not presented within 7 months from the date letters issue, the fiduciary "shall not be chargeable for any assets or moneys that he may have paid in good faith in satisfaction of any lawful claims or of any legacies or distributions to the legatees or distributees of the decedent before such claim was presented". That protection covers good-faith payments made before a late claim arrived. It does not cover paying a lower class while a higher-class claim the executor already knows about sits unpaid.

How should an executor handle creditor claims in practice?

The safest approach is to learn what the estate owes before paying anything beyond funeral and administration expenses. A few rules from Article 18 of the SCPA shape that process:

• Written claims. Under SCPA § 1803(1), every claim other than administration expenses and claims of the United States or New York "must be in writing, contain a statement of the facts upon which it is based and the amount thereof".
• Allowing or rejecting. Under SCPA § 1806(3), "[i]f the fiduciary shall fail to allow the claim within 90 days from the date that it has been presented to him, the claim shall be deemed to have been rejected".
• Creditor lawsuits. Under SCPA § 1810, where a claim has been rejected, "the action must be commenced within 60 days after such rejection".
• Questionable claims. Under SCPA § 1809, an executor who has reason to question a claim may petition the court to require the claimant to show cause why the claim should not be disallowed.

Hold back distributions to beneficiaries until the claims picture is clear, keep a ledger that shows which class each payment belongs to, and when the estate looks short, stop paying class (d) creditors until the higher classes are accounted for. For the wider administration timeline, see our New York probate and estate administration guide. If beneficiaries believe an executor has mishandled the estate's debts, our article on removing an executor for breach of duty covers the remedies.

Talk to us before you pay the bills

If you are serving as an executor or administrator and the debts may exceed the assets, Alan Vaitzman, Esq., and the team at Estate Law New York, 17th Floor, 299 Broadway, New York, NY 10007, can review the claims and the payment order with you before money leaves the estate account. Schedule a free consultation through our contact page.

Frequently Asked Questions

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. No attorney-client relationship is formed by reading this publication. Prior results do not guarantee a similar outcome. Reviewed by Alan Vaitzman, Esq. — Managing Attorney at Estate Law New York. Working in estate law since 2017. J.D., New York Law School (2021); B.A. in Psychology, Brooklyn College (2016). Admitted to practice in New York (Reg. No. 5989199), New Jersey, and Florida (Bar No. 1040681). Office: 299 Broadway, 17th Floor, New York, NY 10007.