Reimbursement for Estate Related Expenses: Negedly v. Smith, 286 So. 3d 341 (Fla. 5th DCA 2019)
After the proper presentation of claims against a decedent’s estate, it is then a personal representative’s duty to pay valid claims to the extent of the funds and assets of the estate which he or she has in his or her hands, subject, of course, to the decedent’s debts.
It is a personal representative’s obligation to ascertain the propriety and existence of the decedent’s debts and pay (and/or settle) those debts. Payment of a claim depends on the circumstances of the case and the intent of the parties, as well as other elements necessary for a valid payment. Moreover, a personal representative is viewed as standing in the position of a trustee holding the estate in trust, not only for the beneficiaries but also a decedent’s creditors.
The Florida Probate Code classifies a decedent’s debts and sets forth a particular order in which they must be paid. Specifically, Florida Statute §733.707 sets the priority for the payment of estate expenses into eight separate classes:
733.707 Order of payment of expenses and obligations.—
(1) The personal representative shall pay the expenses of the administration and obligations of the decedent’s estate in the following order:
(a) Class 1.—Costs, expenses of administration, and compensation of personal representatives and their attorneys fees and attorneys fees awarded under s. 733.106(3).
(b) Class 2.—Reasonable funeral, interment, and grave marker expenses, whether paid by a guardian, the personal representative, or any other person, not to exceed the aggregate of $6,000.
(c) Class 3.—Debts and taxes with preference under federal law, claims pursuant to ss. 409.9101 and 414.28, and claims in favor of the state for unpaid court costs, fees, or fines.
(d) Class 4.—Reasonable and necessary medical and hospital expenses of the last 60 days of the last illness of the decedent, including compensation of persons attending the decedent.
(e) Class 5.—Family allowance.
(f) Class 6.—Arrearage from court-ordered child support.
(g) Class 7.—Debts acquired after death by the continuation of the decedent’s business, in accordance with s. 733.612(22), but only to the extent of the assets of that business.
(h) Class 8.—All other claims, including those founded on judgments or decrees rendered against the decedent during the decedent’s lifetime, and any excess over the sums allowed in paragraphs (b) and (d).
While the priority is clear about what gets paid first, there remains the issue of proving how much should be paid for those expenses, and sometimes a dispute arises between a personal representative and a creditor or family member as to the amount owed for reimbursement or payment of such expense.
That was precisely the issue before the Fifth District Court of Appeal in Negedly v. Smith, 286 So. 3d 341 (Fla. 5th DCA 2019). Ms. Smith entered into a payor agreement with a rehabilitation center to care for Gregory Smith. When Gregory Smith died, the center sued Ms. Smith for their outstanding bill, and she settled the outstanding bill for $15,000 and received an assignment of the debt from the center. Then, Ms. Smith pursued reimbursement from Gregory Smith’s estate, for the full amount of these expenses, which exceeded the settled amount.
The Personal Representative disputed the expenses, so matter was set for an evidentiary hearing. The court awarded Ms. Smith the total amount of unpaid expenses, because she had received the assignment. However, on review, the appellate court reversed, finding a lack of competent substantial evidence to justify the amount. This decision was based on their review of Ms. Smith’s testimony, revealing the mediated settled amount of $15,000 of the paid settled expenses which she had paid, and that she did not introduce into evidence the billing history itself. Even worse, the appellate court determined that, because the billing records were not introduced into evidence, the classification priority from Florida Statute §733.707 was adjusted downward, from a Class 4 to a Class 8.
If you have a question concerning reimbursement for expenses from a decedent, it is most prudent to consult with an experienced probate lawyer.