Handling An Estate with Debts in Texas
Most of us have at least some debts, whether they are attached to something, like a mortgage on a house or a lien on a car, or they stand alone, like credit cards. But what happens when someone dies? What happens to their debt? Who is responsible for paying it? Can I be responsible for the debt of an estate if I am executor?
It is important to note that you as an executor are not personally liable for the deceased's debt, any more than you were when that person was alive. The estate is liable for the debt, and there is a specific order in which it is be paid. (See Tex. Estate Code Sec. 355.102, Claims Classification, Priority of Payment. Funeral expenses, mortgages, child support claims, are higher in priority than unsecured debts like credit cards. The list is extensive. If the estate has more money than the amount of the debt, the debts must be paid before the beneficiaries receive inheritance. However, if the deceased left behind a spouse and/or children, they may be able to take advantage of a family allowance prior to any claims for debt being satisfied. There are specific amounts for this allowance which can be sought even in an insolvent estate.
Regardless of whether the estate has many or few debts, and whether the estate is solvent or insolvent, there is an obligation for the executor to post a ‘notice to creditors' in an area newspaper. This puts unsecured creditors on notice that they must file a claim in order to protect their rights to be paid on the debt. If there are known secured debts, the executor is also responsible for notifying the secured (think of home mortgages or car liens) creditors that the estate is in place and that they (the executor) have been appointed.
If the estate has mostly debts, it may be prudent for the person named as executor to consider not serving or even to consider serving as a dependent administrator. Such an estate is time consuming and with the possible difficulties, having the court there to watch over each step may be the best way to proceed. It may also make sense, in such an instance, for the executor to consider not serving at all; if he/she does not wish to do so, the court will, upon application appoint as executor the person's spouse, an heir, or even a creditor.
If you have been named as an executor and you are unsure of how to proceed, you should review your options with an attorney who has dealt with estate matters to help you form a plan and navigate the process of Texas probate.
Comments
There are no comments for this post. Be the first and Add your Comment below.
Leave a Comment