What Happens to Debts During Probate?

When your loved one passes away, their estate goes into probate, where debts must be dealt with. Talk to an El Paso estate planning attorney if you want to minimize the effect that probate can have on your loved ones.

What Happens to Debts During Probate?

Debts Are Handled First

A deceased person’s debts do not disappear. Instead, the estate becomes responsible for paying them using the assets left behind. The personal representative of the estate has the responsibility to collect assets, review all claims of debt, and finally use the assets to settle every valid debt before sending anything on to the heirs.  

Notifying Creditors Is Required

Once probate opens, the personal representative must notify all known creditors and publish a notice in the local newspaper to ensure any unknown creditors have a chance to make a claim. Creditors then have a limited window to file a formal claim against the estate.

Claims Must Be Reviewed and Approved

Not every bill that arrives after death qualifies as a valid debt. A good representative will examine every claim to make sure it’s valid, properly documented, and timely.

There’s an Order to Paying Debts

Texas law requires debts to be paid according to a strict priority list. Class 1 debts are reasonable funeral expenses and last-illness medical costs. These get paid first. Class 2 debts are the costs of administering the estate itself and are paid next. Later classes cover secured debts, taxes, and finally unsecured claims, like credit cards.

Insights from an El Paso Estate Planning Attorney

What About Community Marital Property?

Debts incurred during marriage are only to be paid out of the deceased spouse’s half of the community property in some cases, but in others, the entire community estate can be reached into to pay them. A lawyer can tell you more about your situation. A spouse is never responsible for a deceased’s separate debts unless they co-signed the debt.

Is Anything Exempt From Debt Collection?

Certain assets never go toward unsecured debts during probate. Your family home and up to $100,000 in personal items like furniture, clothing, and specific vehicles are safe. The court can also set aside a family allowance for the surviving spouse and minor children for up to a year.

What Happens When the Estate Lacks Enough Assets to Cover Debt?

If the estate turns out to be insolvent, higher-priority debts still get paid first until the money runs out. Lower-priority creditors receive nothing or only pennies on the dollar.

Can You Avoid the Process Altogether for Some Assets?

Life insurance with a named beneficiary, retirement accounts with designated heirs, and jointly owned property with right of survivorship typically pass to their beneficiaries outside probate and thus can’t be taken by creditors. You can also set up trusts that will offer some protection against probate.

If probate and debts feel overwhelming right now, talk to us at Townsend Allala Coulter & Kludt in El Paso today. We can help you set up your estate to protect your assets and your loved ones. We serve clients throughout El Paso County, Midland, Odessa, and West Texas, as well as Santa Teresa and Las Cruces, New Mexico.

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