Probate is the process of settling a deceased person’s estate, which includes addressing any outstanding debts. When someone dies, their debts do not automatically disappear.
Instead, the probate process ensures that creditors receive payment before an executor distributes the remaining assets to beneficiaries.
Understanding the probate process
The probate process begins with the court validating the deceased person’s will, if one exists, and appointing an executor. The executor oversees the entire process, including paying debts and distributing assets. If there is no will, the court appoints an administrator to handle these duties.
The executor or administrator must notify creditors of the death. This gives creditors an opportunity to file claims against the estate. In Texas, creditors typically have four months from the date of notice to file their claims. The executor or administrator reviews these claims to determine their validity. Valid claims require payment from the estate.
Paying the outstanding debts
Priority rules guide the payment of debts during probate. Texas law ranks certain debts higher than others. For example, funeral expenses, administrative costs and secured debts like mortgages usually receive top priority. The estate pays these first before addressing other debts, such as credit card bills or medical expenses.
If the estate lacks sufficient assets to cover all debts, Texas law follows a specific order for paying creditors. Secured creditors may claim the property securing their loan, while unsecured creditors receive payments based on the remaining assets. In cases where the estate cannot pay all debts, some creditors may not receive full payment or any payment at all.
Bypassing debt obligations
Certain assets may remain protected from creditors during probate. For example, life insurance policies or retirement accounts with named beneficiaries usually bypass the probate process and go directly to the beneficiaries. Additionally, jointly owned property with rights of survivorship may pass to the surviving owner without becoming part of the probate estate.
Once the executor or administrator pays all valid debts and resolves creditor claims, the remaining assets go to the heirs according to the will or Texas intestacy laws. Understanding how probate handles debts in Texas helps individuals prepare their estate plans to ensure their loved ones face fewer challenges during this process.