This will differ from locale to locale. In the US, many states have adopted the Uniform Probate Code (or have at least harmonized their laws to it) so something similar to these rules would apply almost anywhere across the US.
When it comes to distributing the decedent's estate, there is a hierarchy of priorities. Assets must be distributed to the highest-priority recipients first, then going down the line in descending priority order. The order looks something like this (mostly from §3-805):
- Allowances for surviving spouses or dependents
- Expenses associated with administering the estate (court costs, costs of maintaining a house until it can be sold, cost of locating beneficiaries, etc.)
- Reasonable funeral expenses
- Debts and taxes "with preference under federal law"
- Final medical expenses
- Debts and taxes "with preference under other laws of this state"
- Other debts that don't fit the above list
- Distribution to heirs
The sections discussing "preference" can vary a bit by locale. Most give preference to "secured" debts (like mortgages or car loans) over "unsecured" debts (like credit cards). Some give things like delinquent child support payments priority over regular debts. Your estate lawyer will know the details of the precedence laws for the decedent's locale.
The situation you described may or may not be legal, depending on the specifics of the circumstance. If the deceased had a surviving spouse or dependent child, then none of the money should have been spent until the required allowances have been made. This ensures that they can support themselves while the probate process runs its course.
Paying for lawyer and court fees have the next-highest priority, so those would be the next thing to spend estate funds on. Funeral and burial costs would be next after that.
Spending estate funds on a "celebration of life" party was not appropriate, however. That sort of thing could be paid for out of whatever was left for heirs to inherit, but you won't know whether such inheritance even exists until after all of the decedent's debts are paid for. You may need to file a final tax return (state and federal) for the decedent, and any due taxes would have higher priority than transfers to heirs. Also, part of the probate process is to give formal notice to potential creditors and give them a window of time to make any claims against the decedent's estate. Until that window expires, you could be presented with a debt that you had no idea existed. If the decedent's estate has no more money left to pay that debt, "we spend it on a wake" is not a valid response. Depending on the locale, the estate's executor could be held personally liable for improperly distributing estate assets.
To avoid problems like this, it's generally safer to pay for all estate costs out of pocket, keep detailed records for all expenses, and then have the executor reimburse those expenses once all claims against the estate have been satisfied.
If the court ends up designating the recommended person as executor, then there probably isn't an issue with those distributions being unauthorized (the executor has little room to complain about something that was their idea in the first place). Remember, however, that the judge doesn't have to make your recommended candidate the executor. There's even a chance that you get surprised at probate court by a will or even an heir that you had no idea existed. If someone unexpected gets appointed executor, then they may be upset that assets were distributed without their knowledge or approval.
Cash is very different than credit/debit cards. Using someone else's credit or debit card without official authorization is a crime under federal law, even if the owner is deceased. There are a lot of rules about how financial institutions are required to handle accounts of deceased clients. It's best to notify all banks and card issuers of the death as soon as possible so that they can freeze the accounts and prevent these types of mistakes from being made.
