When it comes to paying debts during probate, most new executors assume they should simply start writing checks — knock out the credit card balance, catch up on the utility bills, settle the hospital charges. It seems logical. But in New Jersey, the order in which you pay those debts isn’t just a matter of organization. It’s a matter of law. Get the sequence wrong, and you could end up owing money out of your own pocket.
New Jersey statute spells out a specific priority system for estate obligations. Funeral costs come first. Administration expenses come second. Federal and state taxes, medical bills from the final illness, outstanding judgments, and general creditor claims each have their own rung on the ladder. On top of that, there’s a nine-month creditor claim period that directly affects when you can safely distribute anything to beneficiaries — and if you skip it, you lose the legal protection that shields you from personal liability.
This guide walks through the full payment sequence for debts and bills during probate in New Jersey. We’ll cover what to pay first, when to pay it, how to handle creditor claims, and the specific mistakes that put executors at financial risk.
What Happens to Debts When Someone Dies in New Jersey?
When a person dies, their debts don’t disappear. They become obligations of the estate. As executor (or administrator, if there’s no will), it’s your job to identify those debts, figure out what’s legitimate, and pay them from estate funds — in the right order and at the right time.
A few things to keep in mind right away. You are not personally responsible for the deceased person’s debts simply because you’re the executor. The estate pays the debts, not you. However, you become personally responsible if you mishandle the process — for example, by distributing inheritance money to beneficiaries before settling valid creditor claims.
Also worth noting: certain debts follow the property rather than the estate. A mortgage, for instance, typically stays with the house. Whoever inherits the mortgaged property generally inherits the mortgage obligation along with it, unless the will says otherwise.
Step One: Secure the Estate and Take Inventory
Before you pay anything, you need to know what you’re working with. Your first job as executor is to gather and protect all of the decedent’s assets. That means collecting bank statements, locating investment accounts, getting the house insured and maintained, and cataloging personal property.
At the same time, you should be identifying every debt and potential claim against the estate. Pull credit reports. Review the mail. Check for outstanding tax obligations. Go through the decedent’s financial records. The more thorough you are in these early weeks, the fewer surprises you’ll face later.
One thing we always tell our clients: open a dedicated estate checking account. Every dollar that moves through the estate — money coming in and money going out — should flow through that account. It keeps your records clean, protects you if anyone questions your accounting, and makes the final settlement much easier.
Step Two: Pay Immediate and Ongoing Expenses
Some bills can’t wait for the nine-month creditor claim period to run its course. These are the expenses necessary to preserve the estate and keep the administration moving forward.
Funeral and Burial Expenses
Under New Jersey law, reasonable funeral expenses sit at the very top of the priority list. If the estate has sufficient funds, these should be paid promptly. N.J.S.A. 3B:22-2 specifically ranks funeral costs as the first category to be paid when estate assets are limited.
Administration Costs
Right behind funeral expenses are the costs of actually running the estate. This includes court filing fees, the cost of obtaining Letters Testamentary, attorney fees, accountant fees, and appraisal costs. These administration expenses are second in priority under N.J.S.A. 3B:22-2 and are generally paid as they come due throughout the probate process.
Ongoing Property and Maintenance Expenses
If the estate includes real property, you need to keep paying the mortgage, property taxes, homeowner’s insurance, and basic maintenance costs. Letting the house fall into disrepair or lose its insurance coverage is a breach of your fiduciary duty. Same goes for car insurance on a vehicle that’s still titled to the estate. These expenses are generally treated as costs of administration.
Step Three: Handle Tax Obligations
Taxes are a significant part of probate, and there are several different filings an executor may need to handle.
The Decedent’s Final Income Tax Returns
You’ll need to file both a final federal income tax return (Form 1040) and a final New Jersey income tax return (NJ-1040) covering the period from January 1 of the year of death through the date of death. These are due by April 15 of the following year.
Estate Income Tax Returns
If the estate earns income after the date of death — interest on bank accounts, dividends from stocks, rental income from property — you may need to file a federal estate income tax return (Form 1041) and the corresponding NJ Form 1041 for the estate itself.
New Jersey Inheritance Tax
New Jersey’s estate tax was repealed in 2018, but the state’s inheritance tax is very much still in effect. The inheritance tax return (Form IT-R for residents) is due within eight months of the date of death, and the tax itself must also be paid within that same eight-month window. Interest accrues at 10% annually on any unpaid balance after the eight-month deadline.
The inheritance tax rate depends on the beneficiary’s relationship to the deceased. Class A beneficiaries — spouses, children, grandchildren, and parents — are exempt. Class C beneficiaries (siblings, sons-in-law, daughters-in-law) and Class D beneficiaries (nieces, nephews, friends, and everyone else) face rates ranging from 11% to 16%.
This is an area where executors frequently get into trouble. If you distribute assets to beneficiaries before paying the inheritance tax and then lack enough funds to cover the tax bill, the State of New Jersey can come after you personally for the shortfall. Pay taxes first. Distribute second.
Federal Estate Tax
The federal estate tax only applies to estates exceeding the federal exemption threshold, which is over $13 million per individual as of 2025. Most New Jersey estates won’t owe federal estate tax, but if you’re anywhere near that number, you need a qualified estate attorney working with you from day one.
Step Four: Deal with Creditor Claims During Probate
This is where the nine-month rule becomes critical.
The Nine-Month Creditor Claim Period in New Jersey
Under N.J.S.A. 3B:22-4, creditors must present their claims to the executor in writing, under oath, within nine months of the date of the decedent’s death. The claim must specify the amount owed and the details supporting it.
Once a creditor presents a claim, you have three months to accept it, reject it, or partially accept it, and you must notify the creditor in writing of your decision (N.J.S.A. 3B:22-7). If you reject a claim, the creditor can take the matter to court to try to prove it.
Here’s the rule that protects you as executor: if you wait the full nine months before making final distributions and a creditor shows up later with a claim, you are not personally liable for any assets you’ve already distributed. After nine months, the creditor may still be able to pursue the estate if assets remain, but they can’t come after you.
This is why we consistently advise executors: do not make final distributions to beneficiaries until at least nine months have passed from the date of death. We know beneficiaries get impatient. We know it can feel like you’re dragging your feet. But those nine months are your shield against personal liability.
What About Debts You Know Exist?
You don’t need to wait for a formal creditor claim to pay a debt you already know is legitimate. If the decedent had an outstanding electric bill, a car payment, or a medical bill from a known provider, you can pay those from estate funds as they come due. The nine-month waiting period is about protecting yourself from unknown or unexpected claims — not about putting all payments on hold.
That said, if the estate might be insolvent (meaning debts could exceed assets), proceed with extreme caution. Pay only what’s necessary to preserve the estate and follow the statutory priority order. More on that next.
The Priority Order for Paying Debts and Bills During Probate
When an estate doesn’t have enough money to pay every claim in full, New Jersey law dictates a strict priority order. Under N.J.S.A. 3B:22-2, the personal representative must pay claims in this sequence:
Priority 1: Reasonable Funeral Expenses
Funeral and burial costs come first. “Reasonable” is the key word here — extravagant expenses could be challenged.
Priority 2: Costs and Expenses of Administration
This covers attorney fees, court costs, appraisal fees, executor commissions, and other costs directly related to administering the estate.
Priority 3: Debts Owed to the Office of the Public Guardian for Elderly Adults
If the decedent received services from the Office of the Public Guardian, those debts are paid next.
Priority 4: Debts and Taxes with Federal or State Preference
Federal tax liens, state tax obligations, and similar preferential debts fall here. This includes any outstanding income taxes owed by the decedent.
Priority 5: Reasonable Medical and Hospital Expenses of the Last Illness
Medical bills from the decedent’s final illness, including compensation to caregivers, come next.
Priority 6: Judgments Against the Decedent
Outstanding court judgments are paid in the order they were originally entered.
Priority 7: All Other Claims
Credit card debts, personal loans, and any remaining obligations are paid last. Within this category, no creditor gets preference over another.
If you pay a lower-priority creditor before a higher-priority one and the estate runs short, you can be personally liable for the difference. This is not theoretical — we’ve represented clients who faced exactly this situation because a prior executor didn’t follow the rules.
Avoiding Personal Liability as Executor: Practical Tips
Everything we’ve covered above points to one central theme: following the correct process protects you. Here are the specific steps that keep executors safe.
Wait the full nine months before making final distributions to beneficiaries. This is the single most important thing you can do to protect yourself. It doesn’t matter how much pressure you’re getting from family members. Those nine months exist for a reason.
Follow the statutory priority order when paying debts. If the estate is solvent and has plenty of money, the order matters less practically — but it still matters legally. If there’s any chance the estate could fall short, follow N.J.S.A. 3B:22-2 to the letter.
Pay all tax obligations before distributing to beneficiaries. This includes the New Jersey inheritance tax, any income taxes owed, and property taxes. The state doesn’t forgive tax debt just because you already handed the money to your sister.
Keep meticulous records. Document every payment, every decision, and every communication. Use the dedicated estate checking account for all transactions. If you’re ever questioned by a beneficiary, a creditor, or the court, your records are your defense.
Get a Refunding Bond and Release signed by each beneficiary before distributing. This protects you if a creditor surfaces later and the estate needs to recover funds from beneficiaries.
Consult an estate attorney. We know this sounds self-serving, but the reality is that the cost of an attorney’s guidance during administration is a fraction of what it costs to fix a mistake — or defend against a personal liability claim.
What Happens If the Estate Can’t Pay All Its Debts?
Not every estate has enough assets to cover every obligation. When debts exceed assets, the estate is considered insolvent. In that situation, the priority order under N.J.S.A. 3B:22-2 becomes absolutely critical, because it determines who gets paid and who doesn’t.
If the estate is insolvent, beneficiaries generally receive nothing — or receive significantly reduced distributions — until all claims within each priority class are satisfied. The estate’s property abates (is reduced) under N.J.S.A. 3B:22-3 to cover debts in the proper order.
As executor of an insolvent estate, your exposure to personal liability is heightened. Pay only what’s necessary, stick to the priority list, and work closely with an attorney who understands New Jersey probate law. The court can adjudge the estate insolvent and determine the amount and priority for payment of each claim, which gives you clear guidance and legal cover.
A Common Mistake: Paying Family First
This comes up more often than you’d think. A beneficiary — often a close family member — has an urgent need. Maybe they need money for rent, or they have their own medical bills piling up. The executor feels sympathy, wants to help, and writes a check from the estate account.
Three months later, a creditor presents a claim. The estate doesn’t have enough left to cover it. Now the executor is personally on the hook.
We understand the human impulse here. But your duty as executor is to the estate first, not to individual beneficiaries. If a family member is truly in a financial crisis, there may be options — but early distribution without proper safeguards isn’t one of them. Talk to your attorney before making any early payments.
If you’ve been named executor of an estate in New Jersey and you’re not sure where to start, we can help. Call Sammarro & Zalarick at (973) 478-1026 for a free consultation. We’ve guided thousands of executors through this process, and we’ll make sure you’re protected every step of the way.
Frequently Asked Questions About Paying Debts During Probate in New Jersey
How long do creditors have to file a claim against an estate in New Jersey?
Under N.J.S.A. 3B:22-4, creditors must present claims in writing and under oath within nine months of the date of the decedent’s death. After nine months, the executor is no longer personally liable for distributions already made. However, creditors can still pursue the estate itself if assets remain.
Am I personally responsible for a deceased person’s debts as executor?
Not automatically. The estate’s assets are used to pay debts, not your personal funds. However, you can become personally liable if you distribute estate assets to beneficiaries before the nine-month creditor claim period expires and a valid claim comes in that the estate can’t cover. You can also face liability for paying debts out of the proper priority order.
Do I have to pay every bill that comes in after someone dies?
No. You should review every claim for legitimacy before paying it. Some debts may be time-barred, disputed, or simply incorrect. You have three months after a creditor formally presents a claim to accept or reject it. For known, ongoing obligations like utilities and property taxes, you should generally continue paying those to preserve estate assets.
What bills should an executor pay first during probate?
Start with funeral expenses, then administration costs (attorney and court fees), then taxes. If the estate may be insolvent, follow the strict priority order under N.J.S.A. 3B:22-2. In a solvent estate, you can pay known, legitimate bills as they come due while reserving enough to cover all anticipated claims before making final distributions.
When can I distribute inheritance to beneficiaries in New Jersey?
The safe answer is: not until at least nine months after the date of death. This lets the creditor claim period expire and protects you from personal liability. Before distributing, make sure all debts, taxes (including the NJ inheritance tax), and administration expenses are paid. Have each beneficiary sign a Refunding Bond and Release before receiving their share.
Protect Yourself While Doing Right by the Estate
Serving as executor is an act of trust, and it’s a responsibility that comes with real legal consequences if things go sideways. The good news is that the path is well-defined under New Jersey law. Pay debts in the right order, wait the full nine months before final distributions, handle tax obligations promptly, and keep detailed records. Do those things and you’ll be in good shape.
If you have questions about paying debts during probate, managing creditor claims, or any part of the estate administration process in New Jersey, contact Sammarro & Zalarick today. With more than 30 years of experience and over 16,000 clients served, we know how to protect executors while getting estates settled efficiently. Call us at (973) 478-1026 for a FREE consultation.
Written by Gary J. Zalarick, Esq.
