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Maryland Debt Payment Priority
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Maryland Debt Payment Priority

Maryland pays estate debts in the order set by Md. Code, Estates and Trusts §8-105. Learn the classes and what happens when an estate is insolvent.

By Settled Editorial

In Maryland, an insolvent estate does not pay debts first-come, first-served. It pays them in the order set by Md. Code, Estates and Trusts §8-105. The Register's fees and administration costs come first, then funeral expenses, the personal representative's compensation, the family allowance, taxes, last-illness medical bills, and general debts last.

That order controls when money is short. Follow it and Maryland's rules protect you. Pay a low-priority creditor ahead of a higher one, or hand assets to heirs before valid claims are settled, and you can owe the difference out of your own pocket. This guide walks through each class in §8-105, shows what happens in an insolvent estate, and explains how a personal representative in Maryland lowers that personal-liability risk.

Why the Order Matters

Many estates hold enough to pay every debt and still leave something for the heirs. When that is true, the order is mostly bookkeeping: everyone gets paid.

The order decides real outcomes in two situations:

  1. Insolvent estates, where the debts are larger than the assets available to pay them. Someone will not be paid in full, and §8-105 decides who.
  2. Early distributions, where the personal representative pays heirs before all claims are resolved and leaves nothing for a claim that outranked them. That mistake lands on the personal representative.

Knowing the order also tells you when it is safe to distribute. In Maryland, safety comes from paying in the §8-105 order, letting the claim period run, and closing the estate through the Register of Wills. See the Maryland creditor claims guide for how the claim deadline fits in.

The Order of Payment Under Maryland Law

Section 8-105 lists the classes of claims in the order a personal representative pays them. Each class is paid in full before anything goes to the next class, and no claim inside a class is preferred over another claim in the same class. The order runs like this:

  1. Fees due to the Register of Wills. The probate fee and other amounts owed to the Register come first.
  2. Costs and expenses of administration. The expenses of running the estate rank next, because the administration has to be funded before anyone else is paid. These cover court costs, appraiser and publication charges, and similar fees.
  3. Funeral expenses. Reasonable funeral costs are payable under §8-106, which caps the preferred amount at $15,000 unless the estate is solvent and the Orphans' Court enters a special order for more.
  4. Compensation of the personal representative, attorney fees, and real estate broker commissions. Pay for administering the estate, legal work, and any licensed broker who sold estate real property sits in this class.
  5. The family allowance. The §3-201 allowance for the surviving spouse or registered domestic partner and minor children is paid ahead of taxes and general creditors. The section below covers the dollar figures.
  6. Unpaid child support the decedent owed. Support that was past due at death is a claim in this class.
  7. Taxes due by the decedent. Taxes the decedent personally owed at death, such as unpaid state income tax or property tax, rank here.
  8. Reasonable medical, hospital, and nursing expenses of the last illness. Bills tied to the final illness rank ahead of general unsecured debts.
  9. Rent the decedent owed, for not more than three months in arrears.
  10. Wages, salaries, or commissions for services performed within three months before death.
  11. Assistance paid under the Public Assistance to Adults Program.
  12. All other claims. Everything that does not fit a higher class lands here: credit cards, personal loans, utility balances, older medical bills, and most other unsecured debt. In an insolvent estate, this is where creditors most often take partial payment or nothing.

Two Maryland death taxes sit outside this list of general claims. The Maryland estate tax (Md. Tax-General Article, Title 7, Subtitle 3) and the separate Maryland inheritance tax (Title 7, Subtitle 2) are estate-level obligations settled through the Comptroller and the Register of Wills, not creditor claims you rank under §8-105. Class 7 above covers taxes the decedent owed personally, and not the tax the death itself triggers. Confirm any death-tax question with the Register of Wills before you pay or distribute.

Confirm the current class wording and the funeral cap with the Register of Wills, because these limits are set by statute and can change. When money is short, check the steps with a licensed Maryland attorney before you pay any single class.

When the Estate Cannot Pay Everything

An estate is insolvent when its debts are worth more than the assets available to pay them. It happens more often than families expect, especially when most of the decedent's wealth passed outside probate through joint accounts, beneficiary designations, or payable-on-death accounts, while the debts stayed with the estate.

In an insolvent Maryland estate:

  • Pay each class in full before you move to the next.
  • If the money runs out inside a class, the claimants in that class share what is left pro rata. Each one receives the same percentage of its claim, and §8-105 gives no claim a preference over another in the same class.
  • A claim that is already due and payable gets no preference over claims that are not yet due.
  • Heirs and beneficiaries receive nothing until every valid debt is resolved. In a truly insolvent estate, they receive nothing at all.
  • Do not distribute anything until you have confirmed the estate's solvency and settled the higher classes.

A worked example. An estate holds $40,000. Register fees and administration costs take $6,000 (classes 1 and 2), leaving $34,000. Funeral expenses are $9,000 (class 3), leaving $25,000. Personal representative and attorney fees are $4,000 (class 4), leaving $21,000. The surviving spouse's family allowance is $10,000 (class 5), leaving $11,000. The decedent owed $3,000 in unpaid income tax (class 7), paid in full, leaving $8,000. Last-illness medical bills (class 8) total $16,000. Only $8,000 remains, so those creditors share 50 cents on the dollar. Rent, wage, and general credit-card claims in the lower classes receive nothing.

If the estate might be insolvent, this is the point to talk to a Maryland probate attorney before you pay any class.

Where the Family Allowance Ranks

Maryland sets aside money for the family before general creditors are paid. Under §3-201, the family allowance is $10,000 for the surviving spouse or registered domestic partner, plus $5,000 for the use of each unmarried child under 18. In the §8-105 order it sits in class 5, ahead of taxes the decedent owed and ahead of every general creditor.

Maryland does not add a separate exempt-property or homestead set-aside on top of this. The §3-201 allowance is the family-protection amount. Because it outranks most claims, a personal representative should identify and set it aside before paying the lower classes. The Maryland family allowance guide walks through who qualifies and how to claim it.

Executor Personal Liability

This is the section a personal representative needs to read closely.

A personal representative who pays claims out of the §8-105 order, or who distributes to heirs before valid claims are settled, can be held personally liable for the shortfall. Maryland's protections assume you pay in order and let the claim period run.

Maryland builds that protection into the process. The Register of Wills opens the estate and takes claims, and the Orphans' Court supervises the administration and hears disputes. In Montgomery, Harford, and Howard counties the Circuit Court judges sit as the Orphans' Court. A creditor's claim is barred unless it is presented within the earlier of six months after death or two months after you mail the creditor written notice, under §8-103. Wait for that window to close, pay in the §8-105 order, and you distribute on solid ground.

Common ways liability arises:

  • Paying general unsecured debts (class 12) before higher classes, such as taxes or last-illness medical bills, are known and settled.
  • Distributing to heirs before the claim period has run and the account is complete.
  • Paying a lower class ahead of the family allowance.

When claims are large, disputed, or unexpected, confirm the steps with the Register of Wills and a licensed Maryland attorney before you pay. The exposure is real.

Practical Steps for the Personal Representative

Step 1: File the inventory first. Know what the estate holds before you weigh claims. Maryland requires you to file the inventory within three months of your appointment under §7-201.

Step 2: Let the claim period run. Mail notice to known creditors and let the §8-103 window close before you treat the debt picture as final. Rushing the calendar to satisfy a relative who wants money now is how personal representatives end up covering a bill themselves.

Step 3: Do not pay the bottom class early. Hold off on general unsecured debts (class 12) until the higher classes, including taxes and last-illness medical bills, are known and paid. Higher-ranked claims can surface later.

Step 4: Test every claim. A filed claim is not automatically a valid one. You can dispute an inflated or unproven claim through the estate.

Step 5: Pay in order and keep your vouchers. Record every payment, the class it falls in, and the date. The account you file with the Register of Wills has to back each payment with a voucher.

Frequently Asked Questions

Does the family have to pay the deceased person's debts?

No. In Maryland, debts belong to the estate, not to relatives individually. A family member is only on the hook for a debt they personally co-signed or held jointly. The estate pays valid claims in the §8-105 order from estate assets.

Are secured debts like a mortgage paid through this order?

Not through §8-105. A mortgage or car loan is tied to specific collateral. The estate can keep the property by staying current on the loan, or the asset can be sold and the lender paid from the proceeds. The secured lender's rights in that collateral run alongside the §8-105 order for general estate funds.

What if a creditor pressures me to pay before the claim period ends?

You are not required to pay early, and paying out of order can cost you. Let the §8-103 window close, confirm the estate can cover the higher classes, and then pay in the §8-105 order. Do not let a creditor push you into paying out of turn.

How do I know when it is safe to distribute?

Distribute only after the claim period has run, the debts and taxes are paid in the §8-105 order, and the account is settled with the Register of Wills. See the Maryland executor duties guide for the full sequence of duties.

Related Maryland Guides

This guide is general information about Maryland estates. It is not legal advice. Confirm anything that affects your situation with the Register of Wills, the Orphans' Court, or a licensed Maryland attorney.

Sources:

It is not legal advice.

Information current as of July 21, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in Maryland can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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