Paying claims against the estate is a basic duty of the executor or administrator. These claims include the debts of the decedent as well as expenses of administration. Texas law sets out rules and priorities for how the claims should be paid. (See Texas Estates Code chapter 355.)
General rules for claims
1. Don’t pay any claim that is barred by the statute of limitations.
2. Claims should be classified and paid in the following order:
- Class 1: Funeral expenses and expenses of last illness up to $15,000.
- Unclassified: Allowances to surviving spouse & children.
- Class 2: Expenses of administration and management of estate.
- Class 3: Secured claims, e.g. tax liens.
- Class 4: Delinquent child support & arrearages.
- Class 5: Taxes, penalties, and interest.
- Class 6: Costs of confinement in Texas prisons.
- Class 7: Repayment of Medicaid assistance.
- Class 8: All other claims.
- (includes funeral expenses & expenses of last illness over $15,000)
3. Do not pay a claim in class 8 before all claims above it have been paid.
4. If you have money on hand to pay only some of the claims in a class, pay a pro rata share of all claims in that class. Do not pay one claim in the class while holding another claim in the same class to wait for additional funds to come in.
5. If the claims against the estate exceed the assets, then pay the highest claims first, and divide the remainder pro rata among the last class of claims to be paid.
6. Do not distribute to beneficiaries or heirs until all claims have been paid.
Claims filed in court
If a creditor of the deceased has filed a claim in the probate court, it is important to show that the claim was handled properly.
1. Determine if the claim is valid and within the statute of limitations.
2. Determine if there will be sufficient assets to pay all claims in the same class (and all claims classed above it).
3. If the claim is valid, and the estate has the funds to pay it, notify the creditor that the claim will be allowed.
4. In the letter allowing the claim, set out the terms of payment:
- Obtain the name & title of the person authorized to sign a Certificate of Satisfaction of claim.
- Provide that within 20 days after the payment is received, the signer will sign and send a satisfaction of claim.
- Require the authorized person to sign and return the notice letter showing agreement to the terms.
5. Send the check, with a note in the memo line.
6. When the creditor sends the Certificate of Satisfaction of claim, your lawyer will file it with the court.