Wednesday, June 9, 2004

Texas Law on Paying a Deceased's Debt

Collectors tend to obtain payment due to the misconception that family members must pay a decedent's debts. According to the Federal Trade Commission, the decedent's estate covers unpaid debt. If the decedent's estate does not cover the debt, creditors usually receive no payment. Family members rarely have an obligation to pay the decedent's debt unless one is a surviving spouse. Even in that instance, Texas law limits creditor claims against the surviving spouse.

Surviving Spouse Obligation

    Creditors can submit claims against the surviving spouse's separate, special community and joint community property. Texas defines separate property as property secured before marriage, as a gift or from an inheritance. Community property refers to property under the control of both spouses obtained during the marriage. The deceased's special property refers to property obtained through marriage under the control of the deceased spouse. Surviving spouse's special community property refers to property obtained during the marriage under the control of the surviving spouse. Joint community property is any property obtained through marriage controlled by both spouses.

    Typically, the surviving spouse's separate and special community property holds no liability. A creditor can submit a claim to the surviving spouse's property if the court establishes liability or deems both spouses liable or if the deceased spouse incurred liability while acting as an agent for the surviving spouse.

Appointing an Executor

    The estate must have an executor or personal representative. A beneficiary can appoint an executor if the decedent passed without a valid will. Beneficiaries may also appoint an executor if the will has no executor or if the named executor refuses to accept the duties. Executors also receive appointment through a valid will or court order. In each case, the court must sign an order approving the appointment.

Notifying the Creditors

    Within one month of receiving appointment, the executor must notify any creditor with a claim against the decedent's estate. Notification may appear in the newspaper of the county where the estate division is to take place. The Texas Comptroller of Public Accounts must receive notification within one month if the decedent sent or was to send taxes to that office. Creditors with property claims must receive notification by mail within two months of the decedent's passing. The executor assumes all liability for failing to notify creditors within the time frame. Unsecured creditors may receive notification any time before estate division ends at the discretion of the executor. All creditors must respond within four months or lose the right to receive payment.

Order of Payments

    Federal debt takes priority over all claims, including funeral expenses. If the decedent has no federal debt, up to $15,000 in funeral and other expenses associated with the last portion of the decedent's illness are paid first. Costs associated with estate maintenance and divisions are paid next. Secured claims within the estate's remaining funds receive payment followed by child support claims. The estate then pays any taxes, penalties and interest owed to Texas. Debt owed to the Texas criminal justice system follows, if applicable. Medical assistance paid by the state of Texas comes next. All other claims receive the remaining portion of the estate.

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