The Six-Level Priority System
Not every estate has enough money to cover all its debts. When assets fall short, the personal representative cannot pick which claims to pay first. The law sets a fixed order for the entire probate process.
If the applicable assets of the estate are insufficient to pay all claims in full, the personal representative shall make payment in the following order: 1. Costs and expenses of administration. 2. Reasonable funeral expenses. 3. Debts and taxes with preference under federal law. 4. Reasonable and necessary medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him. 5. Debts and taxes with preference under the laws of this state. 6. All other claims.
A.R.S. § 14-3805(A)Court fees and professional pay come before anything else. Funeral expenses come next. Federal obligations like income taxes or federal liens take third priority.
Medical bills from the decedent's final illness rank fourth. State-level debts and taxes are fifth. Unsecured debts and everything else share the bottom tier.
Equal Treatment Within Each Class
Within any single category, no creditor gets better treatment than another. A credit card company and a utility provider in the same class receive proportional payments if funds run short.
No preference shall be given in the payment of any claim over any other claim of the same class and a claim due and payable shall not be entitled to a preference over claims not due.
A.R.S. § 14-3805(B)This structure matters for families. If an estate is close to insolvent, the priority system helps set realistic expectations. It shows what heirs will ultimately receive.
The personal representative must follow this order. Paying claims out of sequence can create personal liability.
Anyone who needs to manage the estate should work with a probate attorney. This helps make sure the priority rules are followed correctly. Mistakes in payment order can make the representative personally responsible for shortfalls.
Certain protections, like homestead allowance and family allowance, come first. The court sets these aside before paying any creditor claims. These family protections are separate from the priority system.