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Who Gets the First Payment Out of a Deceased Person’s Estate?

Probate, the process of determining the assets and debts of your estate after your passing, is supervised by a judge in Texas. This process varies for small and larger estates, with having a will making it simpler. Wisely structuring your will may help you avoid probate, especially if no one challenges its validity after your passing. One question you might ask is, “How long do creditors have to collect a debt from an estate in Texas?” Additionally, questions may arise regarding who assists your estate in fulfilling your wishes after your passing.

That person is known as the executor of your will. You will name an executor and possibly a second executor as a backup, within your will. You should think carefully about who you want to put into this position. He or she will be responsible for following the instructions of your will and/or a probate court judge. The executor should be responsible and intelligent enough to follow instructions. They should not be swayed by other factors or people’s opinions. Talk to a potential executor before naming him or her as such in your will.

Your executor oversees making sure the assets of your estate are maintained throughout the distribution process. If your estate owes debts of any kind, then they must pay the debts out of your estate. After settling debts or taxes, referred to as liabilities, the remaining assets can be distributed in accordance with the terms of your will. In a nutshell, this is what the estate planning process looks like in Texas. Will creation, naming of an executor, liability payment, and distribution of assets.

What happens when the probate process begins?

The executor of your will would file a petition to begin the probate case. They would need to be acknowledged as executor by the probate court judge. At that point, he or she would need to begin to keep track of all the assets of your estate. Potential assets include real estate, vehicles, retirement funds, a business, personal property, cash, and bank accounts. A notice to creditors must also be published stating that you have passed. This would allow a creditor to come forward with a debt amount that needs to be paid out of the body of your estate. You may owe money on a mortgage, on credit cards, or on personal debt. Federal student loans are discharged upon the death of a borrower.

Understanding Notice Requirements for Creditors in Estate Administration

Your executor or personal representative must notify creditors of your death. This notification can include publishing in a local newspaper. They could also mail notices to secured creditors like mortgage companies or vehicle finance companies. Additionally, they may send a notice to the Texas Comptroller of Public Accounts.

The costs and expenses of your probate case and estate administration typically take precedence in your estate’s finances. Your executor will receive a reasonable fee for their work on behalf of your estate. Additionally, your executor may need to engage an attorney to aid in estate administration. Other professionals may also be required to ensure creditors are paid and assets are distributed properly. Examples of these are property appraisers and accountants. Managing your estate can be intricate, especially if it is large or complex.

Paying End-of-Life Expenses: Responsibilities for Executors

If you have any outstanding costs associated with your death- burial, funeral, cremation, etc. then those bills must be paid early in the process. Medical bills associated with end-of-life situations will also need to be paid. Your executor should be familiar with what is happening at the end of your life. This is so they can help pay those who need to be paid once you pass away.

Your executor is also responsible for filing your tax return after your passing. Fortunately, Texas has no state taxes so that will not be an issue in your case. An executor will have to determine where to draw money from to pay taxes. The probate court will oversee this process if a case has been filed. Otherwise, the executor will have the final say in taxes and other creditors after you pass away. Therefore, it is so important to select an executor who is responsible and who possesses good judgment.

What happens if your estate has more debt than assets?

The money your estate owes may end up being more than the money that your estate possesses. This is known as an insolvent estate. Your beneficiaries will only have property distributed to them if all creditors and taxes are paid first.

Executor’s Duties: Three Essential Steps in Estate Administration

Your executor will have to follow three steps to fulfill their obligations as the executor of your estate. First, the executor will need to compile a list of your assets. They will organize everything-however he or she deems fit. Next, your creditors will have to be paid in whatever order is mandated by the court or decided upon based on the amount of debt, whether the debt is collateralized and other factors. Finally, your executor will need to distribute your remaining assets to your beneficiaries.

Debts typically do not die with us unless we are talking about federal student loans. Beginning with providing creditors notice as we discussed at the beginning of today’s blog post, your executor will need to take some steps to ensure that your creditors are satisfied with having their loans paid back in full or as close to in full as the situation allows for. This is true for both unsecured and secured creditors. An unsecured creditor is one where the entity does not have any property that it can take back in the event of a default on the loan. An example of an unsecured creditor is a credit card company. An example of a secured lender is a mortgage company or auto finance company.

Notice to Creditors: Requirements Under Texas Probate Code

The Texas Probate Code requires your executor to provide notice to creditors in a certain way once you pass away. The requirements of giving someone notice in a situation involving creditors include:

  1. Filing a notice in a newspaper that is widely circulated in the county where the decedent passed away or where the estate is being administered
  2. Providing notice to the Texas Comptroller of Public Accounts and notice by mail to any secured creditors