What Happens to Debts and Taxes in Florida Probate? A Palm Beach Attorney’s Guide

In Florida probate, a deceased person’s debts and taxes are paid from the estate’s assets before anything passes to heirs and beneficiaries. The personal representative gives notice to creditors, who generally have a limited window to file claims, and the estate settles valid debts and any final tax obligations in a statutory order of priority. Florida has no state estate tax or inheritance tax, so most estates deal only with the decedent’s final income taxes and unpaid bills rather than a death tax.

That short answer hides a lot of moving parts. Whether you are a personal representative trying to do this correctly, an heir worried that a parent’s debts will land on you, or a family member who has just stepped out of a contested guardianship and into administering an estate, the rules below decide who gets paid, when, and how much is left over. Here is how it actually works in Palm Beach County and across Florida.

Who Pays a Decedent’s Debts in Florida?

The estate pays. Not the children, not the surviving spouse personally, not the beneficiaries out of their own pockets. When someone dies, their assets form an estate, and that estate is responsible for the debts. The personal representative (Florida’s term for what other states call an executor or administrator) is the person appointed by the court to gather those assets, deal with creditors, and distribute what remains.

This is the single most common misconception I correct in initial consultations. A grieving daughter calls, panicked, because a credit card company told her she is now responsible for her late mother’s $14,000 balance. She is not. Unless she co-signed the account or was a joint account holder, that debt belongs to the estate. If the estate cannot cover it, the creditor generally goes unpaid. Heirs do not inherit debt the way they inherit a house.

There are real exceptions, and they matter:

• Joint debt and co-signed loans. If you co-signed a car loan or are a joint borrower on a mortgage, that obligation is yours regardless of probate.
• Authorized users versus joint account holders. Being an authorized user on a credit card is not the same as being liable. Joint account holders can be on the hook; authorized users usually are not.
• Assets that secure a debt. If you inherit a home with a mortgage, the mortgage rides along with the house. You do not owe it personally, but the lender’s lien survives.
• Improper distributions. A personal representative who hands out estate money to beneficiaries before paying valid creditors can become personally liable. This is where DIY administration goes badly wrong.

The Creditor Claim Process and the Notice to Creditors

Florida runs a structured creditor process, and the deadlines are unforgiving. Once the court appoints a personal representative, that person must serve a Notice to Creditors. This is governed primarily by in Chapter 733 of the Florida Statutes, and it works in two tracks.

The published notice and the three-month window

The personal representative publishes a Notice to Creditors in a local newspaper of general circulation in Palm Beach County once a week for two consecutive weeks. From the date of first publication, unknown or unascertainable creditors generally have three months to file a claim with the court. Miss that window, and the claim is typically barred.

Direct service on known creditors

Publication alone is not enough for creditors the personal representative knows about or could find through reasonable diligence. Those “reasonably ascertainable” creditors must be served directly. Under Florida Statute 733.702, a creditor who is served has the later of three months from first publication or thirty days from being served to file. Courts take this seriously; the U.S. Supreme Court’s reasoning in Tulsa Professional Collection Services v. Pope is why direct notice to known creditors is constitutionally required, not optional.

And there is an outer limit. Florida Statute 733.710 sets a two-year statute of repose: with narrow exceptions, no claim against the estate survives beyond two years after the date of death, whether or not probate was ever opened. That two-year wall is one reason families sometimes discover an old debt simply cannot be collected.

How the personal representative responds to a claim

Filing a claim does not guarantee payment. The personal representative reviews each claim and may pay it, or file an objection. Once an objection is served, the creditor has a limited period (generally thirty days) to file an independent lawsuit to enforce the claim, or it is barred. This objection power is a meaningful tool against stale, inflated, or unsupported demands.

Order of Payment: Who Gets Paid First

When an estate does not have enough to pay everyone, Florida does not pay creditors in the order they show up. Florida Statute 733.707 sets a strict priority of payment by class. Higher classes are paid in full before lower classes receive anything; if a class cannot be paid in full, its members share proportionally. The order, simplified, runs like this:

1. Costs and expenses of administration — including reasonable attorney’s fees and the personal representative’s compensation.
2. Reasonable funeral and burial expenses — up to a statutory cap.
3. Debts and taxes with federal preference — for example, certain federal tax obligations.
4. Reasonable and necessary medical expenses of the last 60 days of the decedent’s final illness.
5. Family allowance awarded to the surviving spouse and lineal heirs.
6. Arrearages from court-ordered child support.
7. Debts from continuing the decedent’s business, within limits.
8. All other claims — ordinary credit cards, personal loans, and most unsecured debt land here.

The practical takeaway: routine credit card debt sits near the bottom. In a modest estate, administrative costs, the funeral, and final medical bills can consume most of what is available, leaving general creditors with cents on the dollar or nothing. That is lawful when the priority order is followed correctly.

What Assets Are Protected From Creditors?

Florida is famously generous to families when it comes to creditor protection, and several major asset categories never become part of the probate estate or are shielded from creditors entirely.

• Homestead property. The Florida Constitution protects the homestead from most creditor claims and passes it to heirs largely free of the decedent’s general creditors. Homestead is a powerful shield, and it often means the family home stays in the family even when the estate is otherwise insolvent.
• Assets with beneficiary designations. Life insurance proceeds and retirement accounts (IRAs, 401(k)s) paid to a named beneficiary generally pass outside probate and outside the reach of most creditors.
• Jointly owned property with survivorship. Assets held as tenants by the entireties or with rights of survivorship typically pass directly to the survivor.
• Property in a properly funded living trust. Trust assets bypass probate, though the trust may still owe certain obligations. Families who plan ahead with wills and trusts often spare their heirs the entire creditor scramble.

This is why two estates of identical dollar value can produce wildly different outcomes for creditors. An estate built around homestead, beneficiary designations, and a funded trust may leave very little in the probate estate for creditors to reach.

Taxes in Florida Probate: What the Estate Actually Owes

Here is the good news for Florida families: Florida imposes no state estate tax and no inheritance tax. The Florida estate tax was tied to a federal credit that Congress phased out, so since 2005 there has been nothing to file at the state level. An heir in Palm Beach does not pay a state tax simply for inheriting.

That does not make the estate tax-free. Several federal and income-tax obligations can still arise.

Final personal income tax return

The personal representative must file the decedent’s final federal income tax return (Form 1040) for the year of death, reporting income earned up to the date of death. Any tax owed is an estate obligation.

Income earned by the estate itself

If the estate earns income during administration — rent from a property, interest, dividends, gain on a sale — it may need to file a fiduciary income tax return (Form 1041). Estates that take a long time to settle, or that hold income-producing assets, commonly trigger this filing.

Federal estate tax

A federal estate tax exists, but it only applies to very large estates above a high exemption threshold (in the multi-million-dollar range per person, indexed annually). The overwhelming majority of Florida estates owe no federal estate tax at all. For the small number that do, planning around portability of a deceased spouse’s unused exemption becomes important, and that is genuinely attorney territory.

Capital gains and the step-up in basis

One quietly valuable rule: inherited assets generally receive a “stepped-up” cost basis equal to their fair market value on the date of death. If your father bought stock for $20,000 and it was worth $90,000 when he died, your basis is $90,000. Sell it soon after for $92,000, and you are taxed only on $2,000 of gain, not $72,000. This step-up can save heirs enormous amounts and is one reason timing and documentation of date-of-death values matter.

When Debts and Taxes Become Contested

Debt and tax questions rarely stay tidy when a family is already fighting. Our practice focuses on the difficult transitions — including estates that emerge from a contested guardianship, where a vulnerable adult was under court supervision before death. Those files often arrive with disputed bills, questionable transfers made by a former guardian or agent under a power of attorney, and creditors circling assets that should have been protected.

Common flashpoints include:

• Suspicious pre-death transfers. Money or property moved out of the decedent’s name shortly before death can be challenged and clawed back into the estate.
• Disputed creditor claims. A personal representative can and should object to inflated or unsupported claims rather than paying them reflexively.
• Improper distributions by a prior fiduciary. When a guardian or agent paid the wrong people, an accounting and surcharge action may be needed.
• Insolvent estates. When debts exceed assets, the priority statute must be applied precisely, because mistakes expose the personal representative to personal liability.

These disputes look a great deal like the matters our colleagues handle, and the underlying principles — fiduciary duty, proper notice, and orderly payment — carry across state lines even though the statutes differ. For a fuller picture of how a contested estate proceeds from filing to closing, our overview of the walks through each stage.

A Personal Representative’s Practical Checklist

If you have been appointed and debts and taxes are looming, the sequence matters. Do not pay claims out of order, and do not distribute to beneficiaries until creditor deadlines have run. A workable order of operations looks like this:

1. Open the estate and obtain Letters of Administration from the Palm Beach County Circuit Court.
2. Identify and secure all assets; obtain date-of-death valuations.
3. Publish the Notice to Creditors and serve known creditors directly.
4. Open an estate bank account and obtain an EIN from the IRS.
5. Review every claim filed; object to those that are improper or unsupported.
6. File the decedent’s final income tax return, and a fiduciary return if required.
7. Pay valid claims in statutory priority order, only after the claim period closes.
8. Distribute the remainder to beneficiaries and file for discharge.

Rushing any of these steps is how a well-meaning relative ends up personally liable. When the estate is solvent, simple, and uncontested, this can move efficiently. When it is not, get counsel involved early. You can contact our Palm Beach probate team to talk through where your estate stands.

The Bottom Line for Palm Beach Families

Debts and taxes in Florida probate follow a predictable structure: the estate pays, creditors face hard deadlines, payment runs in a statutory order, and protected assets like homestead often stay with the family. Florida adds no estate or inheritance tax, leaving most families to deal only with final income taxes and ordinary bills. The danger lies not in the rules themselves but in applying them out of order — and that is exactly where an experienced probate attorney earns their keep.

Frequently Asked Questions

Do heirs have to pay a deceased person's debts in Florida?

Generally no. A decedent’s debts are paid from the estate’s assets, not by heirs personally. Exceptions apply if you co-signed or were a joint account holder on the debt, or if you inherit property that secures a loan, such as a mortgaged home. Being an authorized user on a credit card usually does not make you liable.

How long do creditors have to file a claim in Florida probate?

Unknown creditors generally have three months from the first publication of the Notice to Creditors. Creditors who are served directly have the later of that three-month window or thirty days from service. An outer two-year statute of repose (Florida Statute 733.710) bars most claims beyond two years after the date of death.

Does Florida have an estate tax or inheritance tax?

No. Florida imposes neither a state estate tax nor an inheritance tax. The federal estate tax can apply to very large estates above a high exemption threshold, but the vast majority of Florida estates owe no death tax at all. The estate may still owe the decedent’s final income taxes.

What gets paid first when a Florida estate cannot cover all its debts?

Florida Statute 733.707 sets a strict priority. Administration costs and attorney’s fees come first, followed by funeral expenses, debts with federal preference, last-illness medical expenses, family allowance, child support arrears, and finally general unsecured debts like credit cards. Lower classes are paid only after higher classes are paid in full.

Is the family home protected from creditors in Florida probate?

Usually, yes. Florida’s constitutional homestead protection shields the primary residence from most creditor claims and passes it to qualifying heirs largely free of the decedent’s general creditors. This protection is one reason a family home often stays in the family even when the rest of the estate is insolvent.