Paying Bills and Managing Finances During Probate
One of the most disorienting parts of becoming an executor is realizing that the bills do not stop. The mortgage payment is due on the first. The electric company wants their money on the fifteenth. The credit card statement arrives with a minimum payment and a deadline. Your loved one has died, and the world keeps sending invoices as if nothing happened. You are now the person responsible for deciding which bills get paid, from which account, and in what order.
Getting this wrong is not just stressful – it can create personal liability for you as executor. North Carolina law establishes a strict priority order for paying estate debts, and paying them out of order can leave you on the hook for the difference. This guide walks you through everything you need to know about managing an estate’s finances during probate: which bills to pay immediately, which to defer, how to set up an estate bank account, and how to follow NC’s statutory priority of claims.
Afterpath provides NC-specific guidance for executors managing estate finances during probate. Our Pathfinder AI guide answers questions about bill priorities and payment order in plain English. Our Task Management system tracks every due date and deadline so nothing slips through the cracks. And our NC Compliance Engine ensures you follow the correct statutory priority when paying estate debts – protecting you from personal liability.
The First 48 Hours: What to Pay Immediately
Not every bill requires immediate action, but some cannot wait. In the first few days after your loved one’s death, focus on protecting the estate’s assets.
Keep the Lights On – Literally
Utilities need to stay active to protect the property. If the deceased owned a home, keeping the electricity, water, gas, and heating or cooling systems running prevents damage to the property (frozen pipes, mold, spoiled food) and maintains its value as an estate asset.
Call each utility provider and explain the situation. Most will:
- Transfer the account into the estate’s name or your name as executor
- Waive late fees if a payment is missed during the transition
- Set up a new billing arrangement going forward
Do not cancel utilities until the property is sold, transferred, or vacated. Even an empty house needs basic utilities to prevent deterioration.
Continue Mortgage and Insurance Payments
The mortgage does not disappear when the borrower dies. If the estate has funds available, continue making mortgage payments to prevent foreclosure proceedings. If the estate account is not yet set up, pay from personal funds and reimburse yourself later – just keep documentation of every payment.
Homeowner’s insurance is equally critical. A lapse in coverage violates most mortgage agreements and leaves the property completely unprotected. Contact the insurance company to update the policyholder information to reflect the estate.
For a detailed guide on managing mortgage obligations after death, see our article on dealing with a mortgage after death in NC.
Do Not Pay Unsecured Debts Yet
This is where many executors make their first mistake. In the rush to “take care of everything,” they start paying credit card bills, medical bills, and personal loans as they come in. Do not do this yet. These unsecured debts are lower in the statutory priority order, and paying them before higher-priority obligations can create personal liability for you.
Acknowledge the bills. File them. Track them. But do not pay them until you have the full picture of the estate’s assets and debts, and until the creditor notice period has run its course.
Setting Up the Estate Bank Account
Before you can properly manage estate finances, you need a dedicated estate bank account. Paying estate bills from your personal account or from the deceased’s personal account creates accounting nightmares and potential legal issues.
Why You Need a Separate Account
- Legal requirement. As executor, you have a fiduciary duty to keep estate funds separate from personal funds. Commingling is one of the most common reasons executors face personal liability.
- Accounting clarity. Every dollar in and out of the estate needs to be tracked. A dedicated account makes this straightforward.
- Tax reporting. The estate may need its own Employer Identification Number (EIN) and will file its own tax return. A separate account simplifies tax preparation.
- Transparency. Beneficiaries and the court can review the estate account to verify that you managed funds properly.
How to Open an Estate Account in NC
- Obtain Letters Testamentary (or Letters of Administration if there is no will) from the Clerk of Superior Court in the county where the deceased lived
- Get an EIN for the estate from the IRS (apply online at irs.gov – it takes about 10 minutes)
- Bring documentation to the bank: Letters Testamentary, the EIN confirmation, a certified death certificate, and your personal identification
- Open a checking account in the name of the estate (for example, “Estate of John Smith, Jane Smith, Executor”)
Most banks are familiar with estate accounts and can guide you through their specific requirements. Some may require a minimum deposit or have specific account types for estates.
For a detailed walkthrough of opening an estate bank account, see our guide on how to open an estate bank account in NC.
Consolidating Estate Funds
Once the estate account is open, begin consolidating the deceased’s financial assets:
- Transfer funds from the deceased’s personal checking and savings accounts
- Deposit any checks payable to the deceased or the estate
- Direct any incoming payments (Social Security, pensions, rental income) to the estate account
- Liquidate assets as needed and appropriate (with court approval if required)
Keep a detailed ledger of every transaction. Afterpath’s Task Management system helps you track each financial obligation and incoming asset, creating the documentation you will need for your annual accounting to the court.
Understanding NC’s Priority of Claims
This is the section that matters most. North Carolina General Statute 28A-19-6 establishes a mandatory priority order for paying estate debts. You must follow this order. Paying a lower-priority creditor before a higher-priority one can make you personally liable.
The NC Statutory Priority Order
Class 1: Costs and expenses of administration This includes court filing fees, executor compensation, attorney fees for the estate, accounting fees, and costs of maintaining estate property. These are paid first because the estate cannot function without them.
Class 2: Funeral expenses Reasonable funeral and burial costs. “Reasonable” is the key word – an extravagant funeral that depletes the estate at the expense of creditors may be challenged. In practice, most funeral costs in the $7,000 to $15,000 range are considered reasonable.
Class 3: Debts and taxes with preference under federal law This primarily covers federal tax obligations – income taxes owed by the deceased, estate taxes (if applicable), and any other debts given priority under federal law.
Class 4: Debts and taxes with preference under NC law State income taxes, property taxes, and other debts owed to North Carolina and its political subdivisions. Medicaid estate recovery claims also fall here.
Class 5: Judgments Any court judgments rendered against the deceased during their lifetime.
Class 6: Wages owed to employees If the deceased employed anyone (household staff, business employees), their unpaid wages have priority over general creditors.
Class 7: All other claims Everything else – credit cards, medical bills, personal loans, unsecured debts. This is the lowest priority class.
What This Means in Practice
If the estate has $100,000 in assets and $150,000 in debts, you do not distribute the $100,000 equally among all creditors. You pay Class 1 debts in full first. If money remains, you pay Class 2 in full. You continue down the list until the money runs out. Creditors in lower classes may receive partial payment or nothing.
Within the same class, creditors are generally paid proportionally. If the estate has $10,000 remaining for Class 7 debts totaling $50,000, each Class 7 creditor receives 20 cents on the dollar.
Afterpath’s NC Compliance Engine automates this calculation. Enter the estate’s debts and assets, and the system tells you exactly which debts to pay, in what order, and how much each creditor receives.
The Creditor Notice Process
Before paying any debts beyond immediate necessities, you must complete the creditor notice process. This is both a legal requirement and a protection for you.
Publishing the Notice
Under NC law, the executor must publish a Notice to Creditors in a newspaper of general circulation in the county where the estate is being administered. This notice:
- Identifies the deceased and the estate
- Names you as executor or administrator
- Gives creditors a deadline to file their claims
The 90-Day Window
Creditors have 90 days from the first publication date to file their claims with the estate. This is the critical window. During this period:
- Collect and review all claims as they come in
- Verify each claim (request documentation, check the deceased’s records)
- Accept valid claims and reject invalid ones
- Track everything carefully
After the 90-day period expires, creditors who did not file a claim are generally barred from collecting. This gives you a clean cutoff point – once the window closes, you know the full scope of the estate’s debt obligations and can begin paying them in priority order.
For step-by-step guidance on publishing the notice, see our article on the NC creditor claims period.
Managing Specific Types of Bills
Mortgage Payments
Priority: Pay immediately and continuously.
The mortgage is a secured debt (Class 3 – lien on the property). If payments stop, the lender can eventually foreclose, destroying the estate’s largest asset. Continue payments from the estate account. If the estate lacks liquid funds, consider whether the property should be sold.
Property Taxes
Priority: Pay when due.
Property taxes in North Carolina are due September 1 and become delinquent on January 6 of the following year. Unpaid property taxes result in a lien on the property and eventually a tax sale. Pay property taxes from the estate account as they come due.
Homeowner’s Insurance
Priority: Maintain without interruption.
Insurance protects the estate’s most valuable asset. Contact the insurer to transfer the policy to the estate’s name. If the policy lapses, the property is unprotected and the mortgage lender may force-place expensive insurance.
Utility Bills
Priority: Keep current for occupied or maintained properties.
Transfer utilities to the estate’s name. Pay current charges from the estate account. If the property is vacant and you are maintaining it, keep minimum utility service to protect the property.
Medical Bills
Priority: Do not pay yet.
Medical bills from the deceased’s final illness are Class 7 claims. File them, track them, but wait until the creditor notice period has closed and you have paid all higher-priority debts. Medical providers may send bills with urgent-looking deadlines. Inform them that the patient is deceased and that they should file a claim against the estate.
Credit Card Debt
Priority: Do not pay yet.
Credit card debt in the deceased’s name alone is a Class 7 claim. Cancel the cards to prevent unauthorized use, but do not pay the balances until you have addressed all higher-priority obligations. If the deceased had recurring subscriptions charged to credit cards, cancel those as well.
For guidance on canceling accounts and subscriptions, see our article on canceling accounts and subscriptions after death in NC.
Life Insurance and Retirement Accounts
Life insurance proceeds paid to a named beneficiary are generally not estate assets and are not available to pay estate debts. The same is typically true for retirement accounts with named beneficiaries. These pass directly to the beneficiary outside of probate.
However, if the estate is named as the beneficiary, those proceeds become estate assets subject to creditor claims. For more details, see our guides on handling life insurance after death in NC and handling retirement accounts after death in NC.
Recurring Subscriptions and Memberships
Priority: Cancel immediately.
Streaming services, gym memberships, magazine subscriptions, software subscriptions, cloud storage – these small charges add up quickly. Review the deceased’s bank and credit card statements for recurring charges and cancel everything that is not necessary for estate administration.
Creating a Bill-Tracking System
Organization is your best defense against missed payments, personal liability, and beneficiary disputes. Set up a system to track every financial obligation.
What to Track for Each Bill
- Creditor name and contact information
- Account number
- Amount owed
- Due date or filing deadline
- Priority class (under NC G.S. 28A-19-6)
- Status (pending, paid, disputed, rejected)
- Payment date and amount (once paid)
- Documentation (copies of bills, correspondence, receipts)
Using Afterpath’s Task Management System
Afterpath’s Task Management system is designed specifically for this. Each financial obligation becomes a tracked task with a due date, priority classification, and status. The system sends reminders before deadlines, flags overdue items, and creates the documentation trail you need for your annual accounting to the court.
The NC Compliance Engine cross-references your payments against the statutory priority order, alerting you if you are about to pay a lower-priority debt before a higher-priority one has been satisfied.
Common Mistakes to Avoid
Paying Debts Out of Order
This is the most dangerous mistake. If you pay $5,000 in credit card debt (Class 7) before paying $5,000 in funeral expenses (Class 2), and the estate runs out of money, you may be personally liable for the $5,000 you paid to the wrong creditor.
Distributing Assets Before Debts Are Resolved
Do not give beneficiaries their inheritance before the creditor notice period has closed and all valid debts have been paid. If a creditor claim comes in after you have distributed assets, you may have to recover funds from beneficiaries or pay the claim yourself.
Commingling Funds
Never mix estate funds with your personal funds. Every dollar should flow through the estate bank account. If you need to pay an estate bill from personal funds in an emergency, document it carefully and reimburse yourself from the estate account as soon as possible.
Ignoring Creditor Claims
Every creditor claim filed during the 90-day window deserves a response. Accept valid claims and formally reject invalid ones. Ignoring claims does not make them go away and can create complications during the final accounting.
Paying Bills from the Deceased’s Personal Account
Once you are appointed executor, the deceased’s personal accounts should be closed and funds transferred to the estate account. Paying bills from the deceased’s personal account creates confusion and may violate your fiduciary duties.
When the Estate Cannot Pay All Its Bills
If the estate’s debts exceed its assets, the estate is insolvent. This is not uncommon, and it does not mean you have failed as executor. It means you must be especially careful about following the priority order.
In an insolvent estate:
- Pay debts strictly in priority order
- Within the same class, pay creditors proportionally
- Beneficiaries receive nothing until all debts are satisfied (or the estate is exhausted)
- You are not personally liable for the shortfall, as long as you followed proper procedures
Notify the court if the estate appears to be insolvent. The Clerk of Superior Court can provide guidance on administering an insolvent estate. If the estate is significantly insolvent or the debts are complex, consider consulting a probate attorney.
For more on dealing with creditors, see our guide on dealing with creditors during probate in NC.
Frequently Asked Questions
Can I pay myself back for funeral expenses I covered personally?
Yes. Funeral expenses are a Class 2 priority – second only to estate administration costs. If you paid for the funeral from your personal funds before the estate account was set up, you can reimburse yourself from the estate account. Keep all receipts and document the reimbursement.
What if a creditor calls me personally about the deceased’s debt?
You are not personally responsible for the deceased’s debts unless you co-signed or were a joint account holder. Tell the creditor to file a claim against the estate. If they pressure you or imply personal liability, they may be violating the Fair Debt Collection Practices Act. Document the call and consult an attorney if the behavior continues.
How does Afterpath help me manage estate bills during probate?
Afterpath’s Task Management system tracks every bill, deadline, and payment. The NC Compliance Engine ensures you pay debts in the correct statutory priority order under NC G.S. 28A-19-6. Pathfinder answers your questions about specific debts and payment priorities in plain English. The Document Vault stores copies of bills, receipts, and creditor correspondence so everything is organized for your annual accounting.
Do I need to pay the deceased’s final income taxes?
Yes. The executor is responsible for filing the deceased’s final federal and state income tax returns. Federal taxes are a Class 3 priority; state taxes are a Class 4 priority. Both must be paid before general creditors like credit card companies and medical providers.
What happens to bills that arrive after the 90-day creditor notice period?
Generally, creditors who do not file a claim within the 90-day window are barred from collecting against the estate. However, some exceptions exist – secured creditors (mortgages, car loans) retain their liens regardless, and certain government claims may have extended filing periods. Consult with an attorney if a late claim arrives that appears substantial.
Moving Forward
Managing estate finances during probate is one of the most demanding responsibilities an executor faces. The bills keep coming, the deadlines keep approaching, and the stakes are real – pay in the wrong order, and you could be personally liable.
But it is manageable, as long as you follow the system: set up the estate account, publish the creditor notice, wait for the 90-day window to close, and then pay debts in the order that NC law requires. Keep meticulous records, and do not distribute assets to beneficiaries until debts are resolved.
Dealing with estate finances while grieving is one of life’s hardest challenges. You do not have to figure it out alone.
Afterpath was built for exactly this moment – to turn the overwhelming chaos of estate settlement into a clear path forward. Our AI guide Pathfinder is available 24/7 to answer your questions, our task system ensures nothing falls through the cracks, and our NC compliance engine makes sure you do everything right.
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