If I were an heir and also he beneficiary of a life insurance policy, to be quite honest, my conscience would bother me, and i would pay the bills off that concerned medical care first. I would not feel any obligation for credit cards, because those large companies are protected through their own insurance policies for loss. Most states do require that bills be paid off first. If the person died intestate, then the state would handle the money, or the attorney you hire to handle the estate. The attorney would be the one that would be able to counsel you concerning the laws of your state.