When a loved one passes away and their estate goes through probate in California, one of the most important questions heirs ask is: “How much will actually be left for me after all the debts are paid?”
Understanding California’s strict order of debt payment in probate is crucial for beneficiaries. This priority system, established by California law, determines exactly which creditors get paid first—and in what order—before any inheritance reaches the heirs. If you’re waiting for your inheritance, knowing this order helps you set realistic expectations about what you’ll ultimately receive and when.
This guide breaks down California’s probate debt payment priority, explains how each category affects your inheritance, and shows you real examples of how estates are distributed after debts.
Why Debt Payment Order Matters in California Probate
California Probate Code establishes a specific priority order for paying estate debts. This isn’t random—it’s designed to ensure that certain essential obligations are met before others.
For heirs and beneficiaries, this priority system directly impacts:
- How much inheritance you’ll actually receive after all debts are satisfied
- How long you’ll wait for your inheritance, since California probate typically takes 12-18 months or longer
- Whether the estate has enough assets to pay all creditors and still distribute to heirs
If the estate doesn’t have sufficient assets to cover all debts, lower-priority creditors may receive reduced payments or nothing at all. In cases where debts consume most or all of the estate’s value, heirs may receive significantly less than expected—or in extreme cases, nothing.
California’s Probate Debt Payment Priority Order
California law requires executors and administrators to pay estate debts in this specific order:
1. Probate Administration Expenses
First priority goes to the costs of administering the estate itself.
These expenses include:
- Probate court filing fees
- Probate attorney fees (based on California’s statutory fee schedule)
- Executor or administrator fees (also statutory)
- Probate referee fees for property appraisals
- Publication costs for creditor notices
- Court reporter fees
- Bond premiums (if required)
Why this matters to heirs: Administration costs are substantial in California. For a $500,000 estate, statutory attorney and executor fees alone total $26,000. These costs come off the top before anyone else gets paid. Use our California Probate Cost Calculator to estimate total administration expenses for your specific case.
2. Funeral and Burial Expenses
Second priority covers funeral, burial, or cremation costs.
California law allows reasonable funeral and burial expenses to be paid early in the probate process. This includes:
- Funeral service costs
- Burial plot or cremation fees
- Casket or urn
- Headstone or memorial marker
- Transportation of remains
Why this matters to heirs: Funeral costs in California average $7,000-$12,000. These expenses are typically paid before probate even opens, often by family members who are later reimbursed by the estate. If you advanced these costs, you’ll be repaid at this priority level.
3. Expenses of Last Illness
Third priority covers medical expenses from the deceased’s final illness.
This includes:
- Hospital bills from the final hospitalization
- Doctor and specialist fees
- Prescription medications
- Ambulance services
- Hospice care costs
- Medical equipment rental
California law limits “last illness” to expenses incurred during the final illness that led to death, typically the last 90 days before passing. Earlier medical bills fall into a lower priority category.
Why this matters to heirs: Medical bills from a final illness can be substantial—easily $50,000 to $200,000+ depending on the length of hospitalization and treatment. These bills must be paid before most other creditors, which can significantly reduce the estate’s value.
4. Family Allowance
Fourth priority provides financial support for the deceased’s surviving spouse and minor children during probate.
California Probate Code allows the court to authorize a family allowance to provide for:
- Surviving spouse’s living expenses
- Minor children’s support and education
- Maintenance of the family home
The court determines a reasonable monthly allowance amount based on the family’s previous standard of living and the estate’s size. This allowance continues until probate closes or the court orders otherwise.
Why this matters to heirs: If you’re the surviving spouse or a minor child, the family allowance ensures you have support while waiting for probate to close. For other heirs, this reduces the estate’s assets before you receive your inheritance.
5. Wage Claims
Fifth priority covers wages owed to employees of the deceased.
If the deceased owned a business or employed household staff, any unpaid wages must be paid at this level. California limits this priority to wages earned within 90 days before death, up to $19,200 per employee (adjusted periodically for inflation).
Why this matters to heirs: This typically affects estates where the deceased owned a business. Unpaid employee wages get paid before general creditors.
6. Secured Debts (Mortgages, Car Loans, etc.)
Sixth priority addresses debts secured by property.
Secured creditors hold liens against specific assets, including:
- Home mortgages
- Home equity lines of credit (HELOCs)
- Car loans
- Secured personal loans
These debts are “secured” because the creditor can reclaim the property if the debt isn’t paid. In probate, the executor typically has three options:
- Pay off the secured debt from estate funds and distribute the property free and clear
- Transfer the property to heirs subject to the debt (heirs inherit the property with the loan attached)
- Sell the property and use proceeds to pay off the loan, with any remaining equity going to the estate
Why this matters to heirs: If you’re inheriting a house worth $600,000 with a $400,000 mortgage, your actual inheritance is the $200,000 equity—not the full $600,000 value. Many heirs choose to assume the mortgage rather than requiring the estate to pay it off, which preserves more liquid assets for distribution.
7. Judgment Liens and Tax Liens
Seventh priority covers court judgments and tax liens against the deceased.
This includes:
- Federal tax liens
- California Franchise Tax Board liens
- Property tax liens
- Court-ordered judgments from lawsuits
These liens attach to the deceased’s property and must be satisfied before the property can be transferred to heirs.
Why this matters to heirs: Tax liens in particular can surprise families who weren’t aware of the deceased’s tax obligations. The IRS and California Franchise Tax Board have broad collection powers and their liens take priority over most other creditors.
8. General Unsecured Debts
Eighth priority includes most common creditor claims.
This broad category covers:
- Credit card balances
- Personal loans without collateral
- Medical bills (other than last illness)
- Utility bills
- Cell phone bills
- Any other unsecured debt
In California, creditors have 120 days from when the executor mails notice to file a claim against the estate. Claims filed after this deadline may be rejected.
Why this matters to heirs: Credit card companies and other unsecured creditors aggressively file claims in probate. However, the executor can reject claims that aren’t properly documented or are time-barred. If the estate lacks sufficient assets, unsecured creditors may receive partial payment or nothing—and they cannot pursue heirs personally for payment.
9. Remaining Claims
Ninth priority covers any other valid claims against the estate.
This catch-all category includes debts that don’t fit the above classifications.
10. Distribution to Heirs and Beneficiaries
Final priority: After all valid debts are paid, remaining assets distribute to heirs.
Only after satisfying all legitimate debts in their proper order can the executor distribute the estate to beneficiaries according to the will or California intestacy laws.
Why this matters most to heirs: This is when you finally receive your inheritance. Understanding the priority order above helps you estimate what will actually be left after all debts are paid.
How California’s Priority System Affects Your Inheritance
Let’s look at a real-world example to see how California’s debt payment priority affects what heirs ultimately receive.
Example Estate Scenario:
Marcus passed away leaving an estate valued at $650,000, consisting of:
- Primary residence: $500,000 (subject to $300,000 mortgage)
- Bank accounts: $100,000
- Investment accounts: $50,000
Outstanding Debts:
- Probate administration costs (attorney, executor, court fees): $28,000
- Funeral expenses: $9,000
- Final illness medical bills: $45,000
- Mortgage on home: $300,000
- Credit card debt: $18,000
- Personal loan: $12,000
Distribution Analysis:
Step 1: Calculate true estate value after secured debt
$650,000 total assets – $300,000 mortgage = $350,000 net estate value
Step 2: Pay priority debts in order
- Administration costs: -$28,000
- Funeral expenses: -$9,000
- Medical bills (last illness): -$45,000
Running total: $350,000 – $82,000 = $268,000 remaining
Step 3: Evaluate remaining unsecured debts
- Credit cards: $18,000
- Personal loan: $12,000
- Total unsecured debt: $30,000
Step 4: Pay unsecured creditors and distribute
$268,000 – $30,000 unsecured debts = $238,000 available for heirs
Plus the home with $200,000 equity (if heirs assume the mortgage)
Total to heirs: $238,000 cash + home with $200,000 equity
What heirs expected vs. received:
Many heirs see “$650,000 estate” and expect that amount. In reality, after debts and costs, heirs received $238,000 in liquid assets plus a house with a mortgage. The estate “lost” $412,000 to debts and costs before distribution.
This is why understanding California’s debt priority system matters—it directly impacts your inheritance timeline and amount.
What Happens If the Estate Can’t Pay All Debts?
California law is clear: if an estate lacks sufficient assets to pay all debts, the executor pays creditors in strict priority order until the money runs out.
Insolvent Estate Example:
Estate assets: $180,000
Total debts: $250,000
Payment process:
- Administration costs ($28,000) – Paid in full
- Funeral expenses ($9,000) – Paid in full
- Medical bills ($45,000) – Paid in full
- Credit cards and loans ($68,000 remaining) – Receive $98,000 total available ÷ $68,000 owed = 144% pro-rata payment (each creditor receives proportional payment)
- Heirs – Receive nothing
In an insolvent estate, lower-priority creditors receive reduced payments and heirs receive nothing. Importantly, California law protects heirs from personal liability—creditors cannot pursue heirs’ personal assets to satisfy estate debts (with rare exceptions for debts the heir co-signed).
The 120-Day Creditor Claim Period
California requires executors to notify known creditors and publish notice in a local newspaper, starting a 120-day claim period. Creditors must file formal claims with the probate court during this window.
Why this matters:
- Claims filed after 120 days can be rejected
- The executor can reject invalid or improperly documented claims
- This deadline provides finality—once the claim period closes, most creditors are barred from collecting
Knowing about this 120-day period helps heirs understand why California probate takes so long. The executor cannot distribute assets to heirs until the claim period closes and all valid claims are resolved.
How Probate Advances Help During the Debt Payment Process
Understanding California’s debt priority system often reveals a frustrating reality: even when the estate has plenty of assets to cover debts and still provide heirs with substantial inheritances, you must wait 12-18 months or longer for probate to close.
During this waiting period:
- You have your own bills to pay
- Unexpected expenses arise
- Financial stress adds to the emotional burden of losing a loved one
A California probate advance provides immediate access to a portion of your inheritance while you wait. This isn’t a loan—it’s an advance on money that’s already yours. You owe nothing if the estate ends up paying out less than expected.
ProbateLend specializes in California probate cases and understands exactly how California’s debt priority system affects your inheritance. We can review your case and provide a realistic advance offer, often funding within 24-48 hours.
Working With a California Probate Attorney
The debt payment priority system is complex, and mistakes can be costly. Executors who pay debts in the wrong order face personal liability.
If you’re serving as executor or administrator, work with an experienced California probate attorney who understands the debt priority rules. A qualified attorney will:
- Ensure debts are paid in proper order
- Review and validate creditor claims
- Reject invalid or time-barred claims
- Protect the estate from unnecessary payments
- Guide you through the entire probate process
Key Takeaways: California Probate Debt Priority
Remember these essential points:
- California law mandates a strict debt payment order that executors must follow
- Administration costs, funeral expenses, and medical bills get paid before general creditors
- The 120-day creditor claim period provides a deadline for creditors to assert claims
- Heirs receive distributions last—only after all valid debts are paid
- Secured creditors have priority for their specific collateral, but general creditors are paid after higher priorities
- You’re not personally liable for estate debts unless you co-signed them
- Probate typically takes 12-18 months in California, which is why many heirs seek advances
Understanding these priorities helps you set realistic expectations about your inheritance amount and timeline. If you need access to your inheritance now while California’s probate process runs its course, contact ProbateLend to learn about California probate advances.
Need Your Inheritance Sooner?
If you’re waiting for a California probate case to close and need funds now, ProbateLend can help. We specialize in California probate advances and provide funding in as little as 24 hours. Get your free quote today.