The Impact of the Amended Ohio Probate Law, Changing the Order in Which Debts Are to Be Paid

By W. Cory Phillips, Esq.

Credit unions are often confronted with unpaid debts prior to one’s death.  If not paid prior to the death of a member, state probate laws will govern who will be paid and in what priority.  For example, in Ohio, the order in which debts are to be paid is set forth in O.R.C. 2117.25.  This is regardless of the amount of assets, or insolvency of an estate.   Understanding this priority classification is critical to payment.      

When someone passes, all assets held by the person that do not otherwise transfer automatically to another person, must pass through probate.  Each of those assets is subject to recovery by a creditor, such as a c, for repayment of sums due.  In Ohio, like most states, there is a very specific law that governs if, how, and when a creditor can obtain payment from a decedent’s estate.[1] 
Recently, the Ohio law that provides the order of priority in which expenses are to be paid by an estate, was amended[2] by the 129th General Assembly File No. 28, HB 153 § 101.01.  The changes took effect on September 29, 2011.  The changes affect the priority of debts due long-term care facilities and the debts due the State of Ohio relating to the Medicaid Estate Recovery program.

Prior to the amendment, O.R.C. § 2117.25 provided that the executors or administrators of a decedent’s estate must proceed with diligence to pay the debts of the decedent and were to apply the assets in the following order:

1. (Unlimited as approved by the Court) Costs and expenses of administration;
2. (up to $7,000) An amount, not exceeding four thousand dollars, for certain funeral expenses, and an amount, not exceeding three thousand dollars, for burial and cemetery expenses.  Burial and cemetery expenses shall be limited to the following:
a. The purchase of a right of interment;
b. Monuments or other markers;
c. The outer burial container;
d. The cost of opening and closing the place of interment; and
e. The urn.
3. (up to $100,000)  The allowance for support made to the surviving spouse, minor children, or both under section 2106.13 of the Revised Code;
4. Debts entitled to a preference under the laws of the United States;
5. Expenses of the last sickness of the decedent (under which healthcare providers often classify unpaid claims);
6. (up to $2,000) If the total bill of a funeral director for funeral expenses exceeds four thousand dollars, then, in addition to the amount described above in division (2) of this section, an amount, not exceeding two thousand dollars, for funeral expenses that are included in the bill and that exceed four thousand dollars;
7. Personal property taxes, claims made under the Medicaid estate recovery program instituted pursuant to section 5111.11 of the Revised Code, and obligations for which the decedent was personally liable to the state or any of its subdivisions;
8. Debts for manual labor performed for the decedent within twelve months preceding the decedent’s death, not exceeding three hundred dollars to any one person;
9. Other debts for which claims have been presented and finally allowed (under which all other creditor claims fall).

The Ohio statute, as amended, creates a new priority claim for creditors defined as nursing homes, residential facilities and hospital long-term care units.  This new provision places expenses of the decedent’s last continuous stay with one of those healthcare providers, 7th in the order of debts to be paid.  A decedent’s last continuance stay includes up to thirty consecutive days during which the decedent was temporarily absent from the nursing home, residential facility, or hospital long-term care unit.

This amendment, along with the expenses of last illness, protects healthcare providers and creates a clear priority above general creditor claims.  Without this latest amendment, many healthcare providers were left with little to no recovery.  This is because the priority under ORC § 2117.25 for expenses of the decedent’s last illness does not apply to all expenses incurred during a protracted illness: In re Estate of Wilson, 75 Ohio Misc. 2d 11, 662 N.E.2d 104, 1995 Ohio Misc. LEXIS 73 (CP 1995).  Priority number 7 may cover this type of expense.

This amendment also impacts the claims of other creditors, as only the assets of the decedent are allocated among claims.  In the event there are insufficient assets to pay creditor claims, the estate may be insolvent.  Personal property of decedent is primarily liable for debts: Ginder & Smith v. Ginder, 72 Ohio L. Ab. 277, 134 N.E.2d 603 (PC 1954). In the event there are not sufficient assets, when all preferred claims against the estate of a deceased person have been paid in accordance with the statute, a pro rata distribution of the remaining funds therein must be made among the general creditors in accordance with GC § 10509-122 (RC § 2117.25): Moore v. Midland Buckeye Fed. Sav. & Loan Assn., 72 Ohio App. 323, 51 N.E.2d 758 (1943).

As with many statutory amendments, good news for some isn’t always good news for all.

If you have any questions on this matter, please contact Mr. W. Cory Phillips, Esq. Cory is an associate who practices in Consumer Collections and is located in the Cleveland office of Weltman, Weinberg & Reis Co., LPA. Cory can be reached at 216.685.1157 and

[1] O.R.C. § 2117.06 et seq.
[2] O.R.C. § 2117.25.


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