Settling an estate in Texas involves more than distributing assets. If you serve as the executor or administrator, you must handle outstanding debts to avoid legal complications.
Identify and notify creditors
First, identify the deceased person’s debts. Request a copy of their credit report and review bank statements to find outstanding balances. Texas law requires you to notify known creditors and publish a notice in a local newspaper to alert unknown creditors. Creditors then have a deadline to file claims against the estate.
Determine the priority of debts
Not all debts hold equal priority. Texas law sets an order for payment. Funeral expenses, estate administration costs, and secured debts, like mortgages, take priority. Unsecured debts, such as credit cards and medical bills, follow. If the estate lacks enough funds to pay all debts, lower-priority creditors may not receive full payment.
Use estate funds, not personal assets
Executors must not use personal funds to pay estate debts. The estate’s assets should cover payments. Before distributing inheritances, ensure all valid debts and taxes receive payment. If the estate has insufficient funds, follow Texas law to distribute the remaining assets fairly among creditors.
Dispute or negotiate claims when necessary
Some creditor claims may lack validity. If a claim lacks proof or was filed late, challenge it. You may also negotiate with creditors to settle debts for less than the full amount, especially if funds remain limited. Proper documentation protects the estate from future claims.
Finalize the estate
Once debts are resolved, distribute the remaining assets to heirs. Filing a final accounting with the court ensures proper debt resolution. Seek court approval before closing the estate.
Handling estate debts during probate in Texas requires careful attention to legal procedures. Following these steps ensures proper estate settlement.
