Florida Probate and Trust Litigation Blog

Establishing Reimbursement for Estate Related Expenses

Case Law Update - ERICA JILL NEGEDLY, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF GREGORY DEAN SMITH, Appellant, v. MARY E. SMITH, Appellee

In Florida, the Statutes classify the debts of decedents and specify the order in which they must be paid. Specifically, Florida Statute Section 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. Sometimes a dispute arises between a personal representative and a creditor or family member as to the amount owed to reimburse the expense.

That was precisely the issue in the recent November 2019 decision out of the Fifth District Court of Appeal. In Negedly v. Smith, Mary Smith entered into a payor agreement with a medical facility to care for Gregory Smith. When Gregory Smith died, the medical center sued Mary Smith for medical expenses. Mary Smith settled the outstanding medical expenses for $15,000 and received an assignment of the debt from the medical facility. Mary Smith then pursued reimbursement from the Estate of Gregory Smith for the full amount of the medical expenses, which exceeded the settled amount. The Personal Representative disputed the medical expenses so the dispute was set for an evidentiary hearing. 

The trial court awarded Mary Smith the total amount of unpaid medical expenses, since she had received the assignment from the medical facility. The appellate court reversed, however, finding insufficient evidence to justify the amount because Mary Smith testified as to the settled $15,000 of actually paid settled medical expenses but never introduced the actual medical bills into evidence. Worse yet, because the billing records were not placed into evidence, the Court moved the classification priority from a Class 4 to a Class 8. 

This case presents a couple of important takeaways:

1. Make sure you are checking the admissibility of the evidence sought to prove the entitlement to creditor claims and expenses for reimbursement.

2. A party can assign (or potentially sell) the entitlement to reimbursement for expenses to another party

3. A reminder that the trial court's determinations are subject to a competent substantial evidence standard on appeal.