§ 29.1Decedent’s Estate in Probate
When a person dies, his estate remains subject to payment of his debts unless the property is exempted by law and provided that procedural guidelines are satisfied. Tex. Est. Code § 101.051. Claims against the estate will be paid in whole or on a pro rata basis to the extent the estate’s assets will allow. Tex. Est. Code §§ 355.107–.108. Estate administration is the process of determining the relative rights of creditors and beneficiaries.
Some assets of the deceased can pass outside probate through methods such as rights of survivorship and trusts. See part VI. in this chapter.
Practice Note: The Texas Supreme Court has appointed a task force to promulgate plain language forms for pro se individuals to use in certain probate matters, such as small estate affidavit proceedings and muniments of title. Probate courts will be required to accept these forms once they become available to the public. See Tex. Gov’t Code § 22.020; Acts 2015, 84th Leg., R.S., ch. 602, § 1 (S.B. 512), eff. Sept. 1, 2015; Texas Supreme Court, Order Creating Landlord-Tenant Forms Task Force, Misc. Docket No. 16-9003 (Jan. 21, 2016).
§ 29.2Passage of Title through Probate
§ 29.2:1Property Passed by Will
A mentally competent person having testamentary capacity and being of legal age (or having been emancipated) may pass his estate and all his rights to property by will. Tex. Est. Code § 251.001. When a person dies leaving a lawful will, he is said to have died “testate,” and title and beneficial ownership of all his property devised or bequeathed by the will immediately vests in the respective devisees or legatees. The right of any beneficiary of the estate is subject to the payment of all claims against the estate and other limitations provided by law. Tex. Est. Code § 101.051. Additionally, on the issuance of letters testamentary or of administration, the personal representative has the right to possession of the real estate assets for purposes of administering the estate. Tex. Est. Code § 101.003; Atlantic Insurance Co. v. Fulfs, 417 S.W.2d 302, 305 (Tex. Civ. App.—Fort Worth 1967, writ ref’d n.r.e.).
If a decedent owns or has a right to property in Texas but he dies without a will, he is said to have died “intestate,” and his property vests immediately in his heirs at law. Tex. Est. Code § 101.001. Determination of heirs at law and passage of title through intestate succession is governed by Tex. Est. Code §§ 201.001– 205.009. Title and inheritance rights of real property situated in another state are governed by the law of that state. See Pellow v. Cade, 990 S.W.2d 307, 313 (Tex. App.—Texarkana 1999, no pet.); see also Restatement (Second) of Conflict of Laws §§ 59, 223 (1971).
If a decedent’s property passes by intestate succession, either the personal representative, a party seeking the appointment of an independent administrator under Texas Estates Code section 401.003, the trustee of a trust holding assets for the benefit of the decedent, a person claiming to be a creditor, or the owner of part of the decedent’s estate may apply for a determination of the decedent’s heirs and the interests the respective heirs have in the decedent’s property. Tex. Est. Code §§ 202.001–.002, 202.004. This proceeding must be brought in the appropriate court of the county in which venue would be proper as set out in Tex. Est. Code § 33.004, except where the proceeding is brought by the guardian of the decedent’s estate. In such a case, the proceeding must be brought in the probate court where the guardianship was pending. Tex. Est. Code § 202.004(3).
Any affidavit or other sworn or acknowledged document concerning heirship recorded for five years or longer in the deed records of a county in which a decedent’s property is located is prima facie evidence of the facts it states when introduced in an heirship proceeding. Tex. Est. Code § 203.001(a). Otherwise, such affidavits carry no significance, although third parties have traditionally relied on them. The statutory affidavit of heirship is different from the long-standing Texas procedure of transferring title to property based upon the filing of affidavits of heirship executed by two disinterested persons. See Stanley M. Johanson, Johanson’s Texas Estates Code Annotated 185–86 (Thomson Reuters 2015). An affidavit of heirship should not be confused with a small estate affidavit; the latter is a statutory method of probating qualifying estates. See section 29.6:4 below.
§ 29.3Administration of Estates
§ 29.3:1Who May Apply for Administration
An executor named in the will, an administrator designated as authorized under section 254.006 of the Texas Estates Code, an independent administrator designated by all of the distributees of the decedent under sections 401.002(b) or 401.003, or any interested person may apply for the appointment of a personal representative. Tex. Est. Code § 301.051. “Interested persons” include heirs, devisees, spouses, creditors, or any others having a property right in or claim against the estate. Tex. Est. Code § 22.018. The application must be filed within four years of the decedent’s death, unless administration is necessary to receive or recover funds or other property due the estate or to prevent real property owned by the estate from becoming a danger to public health, safety, or welfare and the applicant is a home-rule municipality that is a creditor of the estate. Tex. Est. Code § 301.002. Except with respect to foreign wills, letters testamentary will not be issued if a will is admitted to probate after four years from the decedent’s death. Tex. Est. Code § 256.003(b). See section 29.6:3 below for a discussion of probate of will as muniment of title.
§ 29.3:2When Administration Necessary
Administration is deemed necessary if two or more debts exist against an estate, if partition of the estate among the distributees is sought, if the administration is necessary to receive or recover funds or other property due the estate, or if the administration is necessary to prevent real property in the estate from becoming a danger to public health, safety, or welfare; a court may, however, authorize administration for other reasons. Tex. Est. Code § 306.002(c). See part VI. in this chapter for a discussion of assets that pass outside of probate at death.
An estate may be administered with or without court supervision (called “dependent” and “independent” administration, respectively). See Tex. Est. Code §§ 351.051, 401.001–.008; Eastland v. Eastland, 273 S.W.3d 815, 822–23 (Tex. App.—Houston [14th Dist.] 2008, no pet.). The principal difference is that the claim requirements and time frames are stricter in a dependent administration, and it is therefore easier for the creditor’s claim to be rejected, disapproved, or barred. See sections 29.35 (dependent administrations) and 29.54 (independent administrations) below. Additionally, in an independent administration, the creditor may skip the claims process and immediately initiate suit for the collection of the debt. See sections 29.54:1 and 29.55:2.
§ 29.4:1Personal Representative Generally
In this chapter, “personal representative” is used as a generic term including independent executor, independent or dependent administrator, temporary administrator, successor executor or administrator, administrator with will annexed, and guardian. See Tex. Est. Code § 22.031. These are the parties with whom a creditor will most likely have contact during the claims process. Generally, the difference between an executor and an administrator is that the former was named in the decedent’s will.
§ 29.4:2Duties of Personal Representative
A personal representative has a duty to exercise the same care for estate property as a prudent person would for his own property. Tex. Est. Code § 351.101. The representative has a fiduciary duty to the heirs or devisees. Humane Society of Austin & Travis County v. Austin National Bank, 531 S.W.2d 574, 580 (Tex. 1975), cert. denied, 425 U.S. 976 (1976).
After receiving letters testamentary or of administration, the personal representative must collect and take into possession the personal property, record books, title papers, and other business papers of the estate and must deliver these items to the persons entitled to receive them when administration is complete. Tex. Est. Code § 351.102.
§ 29.4:3Duties and Obligations of Personal Representative to Creditors
It has been held that a personal representative stands in a fiduciary relationship to creditors. Cochran’s Administrators v. Thompson, 18 Tex. 652 (1857); Ex parte Buller, 834 S.W.2d 622, 626 (Tex. App.—Beaumont 1992, no writ); but see FCLT Loans, L.P. v. Estate of Bracher, 93 S.W.3d 469, 481–82 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (holding that appointment as an independent executor does not necessarily give rise to a fiduciary duty to creditors); Mohseni v. Hartman, 363 S.W.3d 652, 657 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (executor does not owe duty of due care to creditor who alleges executor’s mismanagement impaired estate’s ability to pay creditor’s claim). There are specific statutory duties for independent personal representatives; see section 29.52:2 below.
Unless a decedent’s will expressly dispenses with the need for a bond or a corporate fiduciary is appointed, a personal representative must post bond. Tex. Est. Code § 305.101. The judge shall set the bond in an amount sufficient to protect the estate and its creditors in accordance with Tex. Est. Code §§ 305.001–.257. Any interested person, including a creditor, may petition the court to raise the bond if it appears inadequate. Tex. Est. Code § 305.251(b). On a showing of just cause, bond may be required of the personal representative if the representative has not otherwise been required to post bond, particularly in adversarial proceedings in which malfeasance is at issue. Tex. Est. Code § 305.002.
§ 29.5Ascertaining Debtor’s Death and Status of Probate
If no one associated with a debtor informs the creditor of the debtor’s death, the creditor will have to ascertain the fact of death and the opening of probate administration, if any, by other means. All deaths in Texas are reported to the vital statistics unit; the time between the date of death and when it is reported varies from two weeks to several months. For a fee the unit will search its archives for a death record. A request may be sent by mail to Texas Vital Statistics, Department of State Health Services, 1100 West 49th Street, Austin, TX 78756-3101, by fax to 512-458-7711, or a certified copy of a death certificate may be ordered online at https://txapps.texas.gov/tolapp/ovra. A schedule of fees and an explanation of the application process is available on the Department of State Health Services website at www.dshs.texas
.gov/vs/reqproc/Ordering-a-Birth-or-Death
-Verification-by-Mail. A death verification can be ordered online at www.dshs.texas.gov/vs/reqproc/verification.shtm. The unit also sells microfilmed death records to private research databases such as LEXIS-NEXIS. See section 3.8 in this manual regarding using private research sources for finding debtors generally.
To ascertain whether an administration has been opened on a decedent’s estate, the attorney should start by asking the clerk of the court having probate jurisdiction in the county in which the decedent last lived. For a county with a large population whose probate court may be unable or unwilling to search for this information on request, the attorney should look to see if the status of probate cases can be found on the county’s website. Finally, the attorney should contact the customer service department of a title company. If a probate proceeding has been opened, the title company should be able to find the cause number of the proceeding.
§ 29.6:1Temporary Administrator
The court may, by written order, immediately appoint a temporary administrator with limited powers. Tex. Est. Code § 452.001; see also Tex. Est. Code § 452.003. The purpose of temporary administration is to preserve the estate until it can pass into the hands of a person fully authorized to administer it. A temporary administration cannot exceed 180 days, but the court may make the temporary administrator a permanent one. Tex. Est. Code §§ 452.003, 452.008. A temporary administration is somewhat like a temporary injunction, preserving the status quo while the situation is assessed.
As a practical matter, a creditor should apply for the appointment of a temporary administrator only if no estate has been opened and it appears that assets are being disposed of or are in danger of being depleted by third parties. See section 29.8 below regarding the responsibilities of a creditor acting as personal representative. A better option may be a fraudulent transfer action coupled with a request for injunctive relief to stop the transfer or wastage. See section 14.30 in this manual regarding fraudulent transfer and sections 8.33 through 8.40 regarding injunctions.
The court may also appoint a temporary administrator with limited powers pending the contest of a will or administration. Tex. Est. Code § 452.051. This appointment can continue until the termination of the contest and the appointment of an administrator or executor with full powers. Tex. Est. Code § 452.051(b). At any time during the pendency of the contest, the court may confer on the temporary administrator all the powers and authority of a permanent administrator with regard to claims against the estate, but the temporary administrator must give sufficient bond. Tex. Est. Code § 452.052.
A temporary administrator has only those rights and powers conferred by the court, and the court may require an additional bond at any time it extends the rights and powers of the temporary administrator. Any acts not expressly authorized are void. Tex. Est. Code §§ 452.101, 452.102; see also Bandy v. First State Bank, 835 S.W.2d 609, 615 (Tex. 1992). Before filing a claim in a temporary administration, a creditor should determine if the order appointing the temporary administrator grants the authority to act on claims against the estate. If the order does not confer this power, filing a claim may be fruitless. Texas law is unclear regarding the effect of filing a claim if the administrator lacks authority to act on it.
§ 29.6:2Administration of Community Property
When a husband or wife dies intestate and the community property passes to the surviving spouse, no administration is necessary. Tex. Est. Code § 453.002. Although the surviving spouse need not qualify before a court, the community property subject to sole and joint management of a spouse during marriage continues to be subject to the liabilities of the now-deceased spouse. In addition, any nonexempt property that passes to that spouse’s heirs or devisees remains subject to liabilities against it while the spouse was alive. Tex. Est. Code § 101.052. The surviving spouse or informal administrator must keep a distinct account of all community debts allowed or paid in the settlement of the estate. Tex. Est. Code § 453.006. The surviving spouse, in addition to other powers, may sue or be sued for the recovery of community property and may sell, mortgage, lease, and otherwise dispose of community property to pay community debts. Tex. Est. Code § 453.003(a).
§ 29.6:3Probate of Will as Muniment of Title
A probated will is documentary evidence of a person’s right to the devised property, otherwise known as a muniment of title. See Ochoa v. Miller, 59 Tex. 460 (1883). For a will to be probated as a muniment of title, there must be no debts owed by the estate except for those secured by liens against real estate, and there must be no other necessity for administration of the estate. Tex. Est. Code § 257.001.
The order admitting a will to probate as a muniment of title acts as legal authority that the devisee or legatee is entitled to receive the decedent’s assets without administration of the estate. Tex. Est. Code § 257.102. No representative will be appointed by the court, and no letters testamentary will issue. If the decedent’s estate is handled in this manner, the attorney for any creditor of the decedent should proceed to collect directly against the heirs as established in the will. See section 29.9 below.
Except for foreign wills, a will cannot be admitted to probate, even as a muniment of title, after four years from the decedent’s death unless it is proved that the applicant was not in default in failing to apply for probate sooner. For a detailed analysis of who is the “applicant” and when default would bar the admission of the will, see Ferreira v. Butler, 575 S.W.3d 331 (Tex. 2019). Letters testamentary may not normally be issued if a will is admitted to probate after four years from the decedent’s death. Tex. Est. Code § 256.003. See also section 29.3:1 above.
§ 29.6:4Small Estate Affidavit
If the value of an estate’s assets, not including homestead and exempt property, does not exceed $75,000, and no application for an administration has been filed, the distributees of the estate may complete and file a small estate affidavit. Tex. Est. Code § 205.001. This affidavit must list the estate’s known assets, liabilities, distributees, and the respective shares of each distributee. Tex. Est. Code § 205.002. It will not transfer title to the decedent’s real property, except for the decedent’s homestead (and then only if the affidavit is recorded in the deed records of the county in which the homestead is located). Tex. Est. Code § 205.006. If the decedent left a will, the affidavit does not affect the disposition of property left under the will. Tex. Est. Code § 205.008. Many probate courts have local rules that greatly restrict the use of small estate affidavits. If the decedent’s estate is dealt with in this manner, the attorney for the creditor should proceed directly against the heirs as shown on the affidavit. See section 29.9 below.
If a decedent’s heirs do not need a probate proceeding to pass title to the decedent’s property or if they wish to avoid the probate process for another reason, they may simply choose not to probate the decedent’s estate. Several devices, such as living trusts and survivorship agreements, take a decedent’s property out of probate. See section 29.9 below regarding successor liability for a decedent’s debts and part VI. in this chapter regarding nonprobate assets.
§ 29.8Creditor’s Ability to Institute Administration of Debtor’s Estate
A creditor of a decedent may open probate administration and receive letters testamentary or letters of administration. If a named executor, a person designated as administrator under section 254.006 of the Texas Estates Code, the surviving spouse, any beneficiary, or any next of kin also applies for letters, their applications will take priority over the creditor’s application. Tex. Est. Code § 304.001.
If appointed personal representative of the estate, the creditor will be held to the same duties and standards as any other personal representative. He will be charged with dealing with the decedent’s property as a prudent person would take care of his own property. See Tex. Est. Code § 351.101. He will be held to a fiduciary’s standard of care in the administration of the estate. Humane Society of Austin & Travis County v. Austin National Bank, 531 S.W.2d 574, 577 (Tex. 1975), cert. denied, 425 U.S. 976 (1976). A corporate fiduciary may be held to an even higher standard. Ertel v. O’Brien, 852 S.W.2d 17, 20 (Tex. App.—Waco 1993, writ denied); but see FCLT Loans, L.P. v. Estate of Bracher, 93 S.W.3d 469, 481–82 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (appointment as independent executor does not necessarily give rise to fiduciary duty to creditors). Furthermore, the creditor will have to post bond. See Tex. Est. Code § 305.101.
If an interested person wants to prevent the creditor from becoming personal representative of the estate, he can either pay the claim; prove that the creditor’s claim is fictitious, fraudulent, illegal, or barred by limitation; or post bond of double the amount of the debt. The bond is secured by a lien against all the estate in the hands of the distributees. Tex. Est. Code §§ 301.201, 301.203.
Other creditors may have priority for being paid out of the estate; the creditor–personal representative should be wary of volunteering payment of any estate debt without prior provision of reimbursement and prioritization. See Tex. Est. Code § 355.103.
As personal representative, the creditor can play an active role in expediting the claims process. Also, the personal representative is entitled to a compensation of 5 percent of amounts received and paid out in cash, subject to certain limitations, and to recover all reasonable expenses incurred in administering the estate. See Tex. Est. Code §§ 352.002, 352.051.
§ 29.9Beneficiary’s Liability for Decedent’s Debts
§ 29.9:1No Liability in General
While an estate is in administration the heirs or distributees are generally not liable for the decedent’s debts. Bailey v. Cherokee County Appraisal District, 862 S.W.2d 581, 583 (Tex. 1993).
§ 29.9:2No Administration or Administration Ceased
If an estate is distributed without any administration, the distributees are individually liable for a pro rata share of a claim against the decedent. Blinn v. McDonald, 46 S.W. 787 (Tex. 1898); Potts v. W.Q. Richards Memorial Hospital, 558 S.W.2d 939, 945 (Tex. Civ. App.—Amarillo 1977, no writ); Perkins v. Cain’s Coffee Co., 466 S.W.2d 801, 802–03 (Tex. Civ. App.—Corpus Christi 1971, no writ). The pro rata share is of assets actually received by the distributees or, if the property has been disposed of, is of the value of the disposed property. Chadwick v. Watkins, 258 S.W.2d 194, 197–98 (Tex. Civ. App.—Texarkana 1953, no writ). Additionally, the decedent’s creditors have priority over claims against the distributees that arose after the distribution from the estate. Wallace v. Republic National Bank & Trust Co., 80 F.2d 787, 789 (5th Cir. 1936), cert. denied, 298 U.S. 683. This pro rata liability also applies when the estate is withdrawn from administration. Tex. Est. Code § 354.058.
§ 29.9:3After Final Distribution
No claim for money against a decedent’s estate may be allowed after final distribution of the estate. If the action is not barred by limitations, however, a creditor may sue the distributees directly, but his recovery will be limited to the value of the property received by them. Tex. Est. Code § 355.063. An independent executor may determine for himself when an estate is ready for distribution, though there are unpaid claims against the estate; the creditor’s remedy is against the devisees or legatees who, as distributees, take the property subject to debts owed by the estate. Anderson v. Huie, 266 S.W.2d 410, 412 (Tex. Civ. App.—Dallas 1954, no writ). A “legatee” includes a person entitled to a legacy under a will. Tex. Est. Code § 22.021. A “devisee” includes a legatee. Tex. Est. Code § 22.009. The creditor must plead and prove the distribution of the property. Perkins v. Cain’s Coffee Co., 466 S.W.2d 801, 803 (Tex. Civ. App.—Corpus Christi 1971, no writ).
§ 29.10Exempt Property in Probate
If a decedent left a surviving spouse or minor child, his homestead is not liable for debts of the estate, except for purchase money, taxes due on it, work and material used in constructing improvements on it, an owelty of partition imposed against the entirety of the property, the refinance of a lien against the homestead, an extension of credit on the homestead, or a reverse mortgage. Tex. Est. Code § 102.004; National Union Fire Insurance Co. of Pittsburgh v. Olson, 920 S.W.2d 458, 461–62 (Tex. App.—Austin 1996, no writ). This applies regardless of whether the surviving family member occupies the property; it even applies if the decedent devised the property to someone other than the surviving family member. Milner v. McDaniel, 36 S.W.2d 992, 993 (Tex. 1931); National Union Fire Insurance, 920 S.W.2d at 462; see also Stanley M. Johanson, Johanson’s Texas Estates Code Annotated 73–75 (Thomson Reuters 2015). See sections 27.34 through 27.40 in this manual for a discussion of the homestead.
The personal property of a decedent that is exempt from forced sale at his death remains exempt from forced sale to satisfy debts of his estate, except for payment of funeral expenses and the expenses of his last illness, if claims for those expenses are timely presented. Tex. Est. Code §§ 353.155, 355.102, 403.001, 403.051(a)(3). See sections 27.32 and 27.41 in this manual for a discussion of exempt personal property.
§ 29.11:1Allowance in Lieu of Exempt Property
If a decedent did not leave property exempted from forced sale, the court will make a reasonable allowance to substitute for the property and order it paid to the surviving spouse and children. The allowance in lieu of a homestead may not exceed $45,000, and the allowance in lieu of all other exempt property may not exceed $30,000, exclusive of the allowance for the support of the surviving spouse, minor children, and adult incapacitated children. Tex. Est. Code § 353.053; see also Tex. Est. Code § 403.001 (independent executor to set aside and deliver to those entitled exempt property and allowances for support).
§ 29.11:2Family Allowance to Spouse, Minor Children, and Adult Incapacitated Children
The surviving spouse or any person authorized to act on behalf of minor children or adult incapacitated children of a deceased may petition the court for payment of a family allowance sufficient to provide support and maintenance for one year from the time of the decedent’s death. Tex. Est. Code §§ 353.101, 353.102; see also Tex. Est. Code § 403.001. Payment of this allowance takes precedence over all claims against the estate except those for funeral expenses and expenses of the decedent’s last illness. Tex. Est. Code §§ 353.104, 355.102; see also Tex. Est. Code § 403.051(a)(3) (independent executor classifies and pays approved and established claims). The family allowance is in addition to the passage of homestead and exempt property or an allowance in lieu of that property.
§ 29.12Monitoring Probate Court Proceedings
A creditor may request notification of all motions, applications, and proceedings. The request must be filed with the county clerk, and the requesting party must pay the fees and costs for such notices. Tex. Est. Code § 51.202. It is generally more advantageous for the creditor’s attorney to enter an appearance in the estate proceeding.
§ 29.12:2Inventory and Appraisement; Affidavit in Lieu of Inventory, Appraisement, and List of Claims
A personal representative must file an inventory, appraisement, and list of claims of the estate within ninety days of qualifying unless the court shortens or extends the time for filing. Tex. Est. Code §§ 309.051(a), (b), 309.052. Alternatively, in the case of an independent administration, if there are no unpaid debts at the time the inventory is due, except for secured debts, taxes, and administration expenses, the personal representative may file in lieu of the inventory, appraisement, and list of claims an affidavit stating that all debts, except for secured debts, taxes, and administration expenses, are paid and that all beneficiaries, have received a verified, full, and detailed inventory. The affidavit must be filed within ninety days, unless the court changes the time period. Tex. Est. Code § 309.056(b). Besides sending copies of the full, verified, detailed inventory to all persons or entities entitled to receive property from the estate, the personal representative must also send a copy of the inventory, appraisement, and list of claims to any interested person who requests it in writing or obtains an order from the court compelling the personal representative to provide a copy. Tex. Est. Code § 309.056(c). Unless requested in writing, the personal representative does not have to provide a copy of the full, verified, detailed inventory to devisees who are to receive property valued at $2,000 or less, who have received all property to which they are entitled under the will before the affidavit is filed, or who have waived their right to receive the inventory and appraisement. Tex. Est. Code § 309.056(b–1). Personal representatives often seek an extension of time to file an inventory, and the extension is routinely granted. But this information could be critical to the creditor’s strategy, particularly for secured creditors choosing between matured secured claim status and preferred debt and lien status; see section 29.23 below. In an appropriate case, therefore, the attorney should consider opposing the representative’s request for an extension to file an inventory.
§ 29.12:3Contesting Probate Proceedings Generally
Any person interested in an estate may contest any proposed action to be decided by the probate court by filing its opposition in writing. Tex. Est. Code § 55.001. Proceedings that could be opposed include the prioritization, classification, and payment of claims; the granting of fees or commissions; the authorization of sales of property; the designation of exempt property; and the determination of family allowances.
[Sections 29.13 through 29.20 are reserved for expansion.]
II. Claims Procedure Generally
§ 29.21:1Methods of Notice—Publication, Posting, Mail
Personal representatives are required to give notice to creditors and other interested persons of the opening of administration by publication, certified or registered mail, or posting. Published notices must be printed in a newspaper of general circulation in the county in which letters of administration or letters testamentary are issued. Tex. Est. Code § 51.054. Mailed notices must be sent by certified or registered mail, return receipt requested, to the last known post office address of the creditor. Tex. Est. Code § 51.052. Posted notices are posted by the sheriff or constable at the courthouse door or the location in or near the courthouse where public notices are customarily posted in the county in which the proceedings occur, for not less than ten days before return day. Tex. Est. Code § 51.053.
§ 29.21:2One Notice Sufficient
If a former representative, co-representative, or guardian has already given the required notices, a successor representative or guardian does not have to give repeated or additional notice. Tex. Est. Code §§ 308.055, 1153.005.
§ 29.21:3Failure of Personal Representative to Give Notice
If a representative or guardian fails to give any required notice, the representative, guardian, and the sureties on their bonds, if any, will be liable for any damages suffered by any person because of that failure unless it appears that the creditor had actual notice. Tex. Est. Code §§ 308.056, 1153.005.
Specific notice requirements are discussed below at section 29.34 (dependent administrations), section 29.53 (independent administrations), and section 29.63 (guardianships).
§ 29.22:1Claim for Money vs. Contingent or Unliquidated Claim
A claim for money is a claim for a definite amount based on specific data, not a claim for an undetermined amount. Anderson v. First National Bank, 38 S.W.2d 768, 769–70 (Tex. 1931); Connelly v. Paul, 731 S.W.2d 657, 659 (Tex. App.—Houston [1st Dist.] 1987, writ ref’d n.r.e.). A contingent or unliquidated claim is not a claim for money. A tort claim not reduced to judgment, for instance, would be a contingent or unliquidated claim. Anderson, 38 S.W.2d at 769–70; Wilder v. Mossler, 583 S.W.2d 664, 667 (Tex. Civ. App.—Houston [1st Dist.] 1979, no writ). Also, a claim for equitable relief is not a claim for money. Lusk v. Mintz, 625 S.W.2d 774, 776 (Tex. App.—Houston [14th Dist.] 1981, no writ).
§ 29.22:2Claim Reduced to Judgment before Death
If a defendant dies after judgment is rendered against him, execution may not issue on the judgment; the debt must be presented and proved in the course of administration. Tex. R. Civ. P. 625. It appears that an alternative method of presentment is to file a certified copy of the judgment with the probate court. Conrad v. Judson, 465 S.W.2d 819, 827 (Tex. Civ. App.—Dallas 1971, writ ref’d n.r.e.).
If the judgment has not been abstracted by the time the judgment debtor dies, subsequent abstracting of the judgment will not convert the claim into a secured claim. First National Bank v. Cone, 170 S.W.2d 782 (Tex. Civ. App.—Fort Worth 1943, writ ref’d). If the judgment lien did not attach to the decedent’s homestead during his life, it does not attach to the homestead property on death. Harms v. Ehlers, 179 S.W.2d 582 (Tex. Civ. App.—Austin 1944, writ ref’d). Otherwise, a properly abstracted judgment that attached to the decedent’s property before death is a valid lien against the nonexempt real property owned by the decedent at death, and the judgment creditor should proceed as a secured creditor. See Tex. Est. Code § 22.024, defining “mortgage” or “lien” as including a judgment, attachment, or garnishment lien.
If a document evidencing or supporting a claim provides for attorney’s fees, the creditor may include in his claim the portion of the fee he has already paid or contracted to pay the attorney to prepare, present, and collect the claim. Tex. Est. Code §§ 355.003, 1157.003. Attorney’s fees ordinarily recoverable under chapter 38 of the Civil Practice and Remedies Code may also be collected. Childs v. Taylor Cotton Oil Co., 612 S.W.2d 245 (Tex. Civ. App.—Tyler 1981, writ ref’d n.r.e.).
A secured claim is presented by the creditor as either a matured secured claim or a preferred debt and lien. See Tex. Est. Code §§ 403.052–.054. The failure of the creditor to make a timely and effective election results in the claim being treated as a preferred debt and lien. Tex. Est. Code § 403.052.
§ 29.23:1Matured Secured Claim
A secured creditor holding a matured secured claim can elect to have the debt allowed and approved as fully matured, even if it has not yet matured under the terms of the original obligation; however, the personal representative will still pay the allowed and approved claim in the due course of administration. See Tex. Est. Code §§ 355.151–.160, 403.052–.054; see Tex. Est. Code §§ 1157.151–.153 for secured claim procedures in guardianships. The creditor has priority against the collateral over all other creditors and claims of the estate, except for (1) funeral expenses and expenses of the last illness, not to exceed $15,000 in each category; (2) allowances made to the surviving spouse and children, or to either of them; and (3) expenses of administration. Tex. Est. Code § 355.103. If the value of the collateral is not sufficient to fully pay the debt, the creditor holding a matured secured claim may collect any deficiency as a Class 8 unsecured claim. Tex. Est. Code §§ 355.102, 355.153, 403.053, 1157.151. See section 29.24:1 below regarding handling of mature secured claims by the personal representative and the court generally.
§ 29.23:2Preferred Debt and Lien
A secured creditor electing as a preferred debt and lien may have the debt paid according to the terms of the instrument (typically a note) secured by the lien. The creditor may look only to the property for satisfaction of the debt; the debt cannot be collected from any other estate assets. If the debt is not paid by the deceased’s successors in interest, the creditor must foreclose on the collateral to collect what he can from the proceeds of foreclosure. See Tex. Est. Code §§ 355.151(a)(2), 355.154, 355.155, 1157.151. See section 29.24:2 below regarding handling of preferred debts and liens by the personal representative and the court generally.
§ 29.23:3Choice of Matured Secured Claim or Preferred Debt and Lien
A creditor should opt for matured secured claim status if either (1) the value of the property is substantially less than the debt or is rapidly declining in value, but there appear to be other assets from which to pay any deficiency, after allowances and Class 1 and Class 2 claims are paid or (2) the creditor deems it worthwhile to accelerate any outstanding installments. If the estate is in dependent administration and the creditor wants to actually foreclose his lien (as opposed to obtaining an order for the personal representative to sell the collateral), the claim must be a preferred debt and lien. See section 29.40:2 below.
§ 29.24Handling of Secured Claims by Personal Representative and Court Generally
§ 29.24:1Matured Secured Claim
If a secured claim is a matured secured claim, the court in a dependent administration, or the personal representative in an independent administration must treat it as a Class 3 claim and pay it to the extent of the value of the collateral, after Class 1 and Class 2 claims but before lower-priority claims are paid. Tex. Est. Code ch. 355, subch. C, D; ch. 403, subch. B (decedent’s estate); Tex. Est. Code ch. 1157, subch. C, D (guardianship). See section 29.26 below regarding claim priority. If there are not enough funds elsewhere in the estate to pay Class 1 and Class 2 claims, the representative must invade the collateral to pay those claims. If the collateral does not satisfy the entire claim, the representative must pay the deficiency as a Class 8 claim out of other assets of the estate, to the extent those assets are available. Tex. Est. Code § 355.102; see also Wyatt v. Morse, 102 S.W.2d 396, 398–99 (Tex. 1937).
Texas Estates Code sections 355.153 and 403.053 state that the secured creditor is not entitled to exercise any remedies in a manner that prevents the payment of the higher priority claims and allowances and, during the administration of the estate, is not entitled to exercise any contractual collection rights, including the power to foreclose, without either the prior written approval of the independent executor or court approval. Tex. Est. Code §§ 355.153(a), 403.053(a).
Section 403.053(a) may not be construed to suspend or otherwise prevent a creditor with a matured secured claim from seeking judicial relief of any kind or from executing any judgment against an independent executor. Except with respect to real property, any third party acting in good faith may obtain good title with respect to an estate asset acquired through a secured creditor’s extrajudicial collection rights, without regard to whether the creditor had the right to collect the asset or whether the creditor acted improperly in exercising those rights during an estate administration due to having elected matured secured status. Tex. Est. Code § 403.053(b).
If a claim approved or established by suit as a matured secured claim is secured by property passing to one or more devisees in accordance with Texas Estates Code chapter 225, subchapter G, the independent executor shall collect from the devisees the amount of the debt and pay that amount to the creditor or shall sell the property and pay out of the sale proceeds the claim and associated expenses of sale consistent with the provisions of Tex. Est. Code § 355.153(b), (c), (d), and (e) applicable to court supervised administrations. Tex. Est. Code § 403.053(c).
§ 29.24:2Preferred Debt and Lien
If a secured claim is a preferred debt and lien, the court or the personal representative in an independent administration may either pay off the debt or continue making payments. The creditor has priority over all other claims in the collateral, including Class 1 and Class 2 claims, but can look only to the collateral for satisfaction. See Cessna Finance Corp. v. Morrison, 667 S.W.2d 580 (Tex. App.—Houston [1st Dist.] 1984, no writ).
During an independent administration, a secured creditor whose claim is a preferred debt and lien against property securing the indebtedness under Tex. Est. Code § 403.052 is free to exercise any judicial or extrajudicial collection rights, including the right to foreclosure and execution, provided, however, the creditor does not have the right to conduct a nonjudicial foreclosure sale within six months after letters are granted. Tex. Est. Code §§ 403.052, 403.054.
§ 29.25Claim Not Required for Offset
If a creditor, such as a bank, has a right of offset against funds of a decedent it is holding, it may exercise that right (assuming it has the right to do so otherwise) without having to file a claim in probate. Bandy v. First State Bank, 835 S.W.2d 609, 617 (Tex. 1992).
§ 29.26Classification of Claims, Allowances, and Expenses of Decedent’s Estate
Claims, allowances, and expenses are classified and have priority of payment as follows:
1.Class 1—funeral expenses and expenses of the decedent’s last illness (including claims for reimbursement for these expenses) in a reasonable amount approved by the court, not to exceed $15,000 in each category (any excess shall be paid as a Class 8 claim);
2.allowances paid to the surviving spouse, the children, or both;
3.Class 2—expenses of estate administration, preservation, safekeeping, and management, including fees and expenses awarded under section 352.052 of the Texas Estates Code, and unpaid expenses of administration awarded in a guardianship of the decedent;
4.Class 3—secured claims, as far as they can be paid from the proceeds of property subject to the lien; if property is encumbered by more than one lien, the oldest is paid first, but no other preference is given to that lien;
5.Class 4—claims for the principal amount of and accrued interest on delinquent child support and child support arrearages that have been confirmed as a judgment or a determination of arrearages by a court under title 5 of the Texas Family Code or administratively determined by the Title IV-D agency, and claims for unpaid child support obligations under section 154.015 of the Texas Family Code;
6.Class 5—claims for taxes, penalties, and interest owed the state;
7.Class 6—claims for cost of confinement in the Texas Department of Criminal Justice;
8.Class 7—claims for repayment of medical assistance payments made by the state; and
9.Class 8—all other claims.
Tex. Est. Code §§ 355.102, 355.103; see also Tex. Est. Code §§ 352.052, 352.053.
The death of a mortgagor or pledgor does not in itself revoke the ability of a secured creditor to conduct a nonjudicial foreclosure sale if the creditor already had that right; however, the creditor should avoid foreclosing on the property after the death of the debtor and before the administration of his estate is opened. See Pearce v. Stokes, 291 S.W.2d 309, 310–11 (Tex. 1956). See sections 29.40, 29.56, and 29.68 below regarding foreclosure sales in dependent administrations, independent administrations, and guardianships.
[Sections 29.28 through 29.30 are reserved for expansion.]
§ 29.31Dependent Administration Generally
In a dependent administration, the judge of the court in which the estate is pending is responsible for ensuring that the administrator acts in compliance with court orders. A dependent administration allows the court to supervise and control the sale of estate property and assets, payment of debts, execution of contracts, settlement of lawsuits, and distribution of the estate. See Tex. Est. Code ch. 351, subch. B, D. Any interested person, including a creditor of the estate, may apply for a dependent administration. Tex. Est. Code §§ 256.051, 301.051.
§ 29.32When Dependent Administration Instituted
Letters of administration will be granted if the will fails to name an executor. Letters of administration may also be granted, if necessary, if all the executors named in the will decline to serve, fail to qualify within twenty days after letters testamentary have been issued, or fail to present the will for probate within thirty days after the testator’s death, unless there is good cause. This type of administration is often referred to as administration with will annexed. The court may also order dependent administration on any other proof that administration is necessary or when the person dies intestate. Tex. Est. Code § 306.002.
Although it is possible for a personal representative in a dependent administration to be a party named in a will admitted to probate, the representative will more likely be an administrator, not an executor. For convenience, the term “administrator” will be used in this part III. to refer to the personal representative in a dependent administration.
See section 29.4 above regarding the rights and duties of personal representatives generally and whether bond will be required.
§ 29.33:1Powers of Administrator
The administrator has a number of statutory powers, some of which may be exercised only with the court’s permission. For collections purposes, they include the power to—
1.renew or extend any obligation owed by the estate;
2.make compromises or settlements in relation to property or claims in dispute or litigation;
3.compromise or pay in full any secured claim that has been allowed and approved by conveying the collateral to the secured creditor in satisfaction of the claim; and
4.abandon the administration of property of the estate that is burdensome or worthless. If the abandoned property is collateral securing a claim, it may be foreclosed on without further order of court.
These powers may be exercised only after written application to the probate court and authorization by court order. Tex. Est. Code § 351.051.
§ 29.33:2Duties of Administrator
For purposes of creditors’ claims against the estate, an administrator must—
1.give notice of his appointment (as described in section 29.34 below) (Tex. Est. Code §§ 308.051, 308.053);
2.prepare and file an inventory, appraisement, and list of claims or affidavit in lieu of inventory, appraisement, and list of claims with the probate court within ninety days of qualifying as administrator (Tex. Est. Code §§ 309.051–.052);
3.report to the court annually regarding the claims allowed, paid, rejected, or sued on, as well as a variety of other matters incident to the estate (Tex. Est. Code §§ 359.001–.002);
4.pay claims allowed and approved or established by suit, in order of priority (Tex. Est. Code §§ 355.101–.106);
5.close the administration when all debts known to exist against the estate have been paid in full or as far as the assets in the administrator’s hands permit, and there is no further need for administration (Tex. Est. Code § 362.001); and
6.file a final verified account for final settlement of the estate (Tex. Est. Code § 362.003).
§ 29.34:1Notice by Publication or Posting
An administrator must, within one month of receiving letters, publish a notice of administration. If no newspaper of general circulation in the county in which letters were issued, notice must be posted. Tex. Est. Code § 308.051. A copy of the notice together with the publisher’s affidavit must be filed with the court. Tex. Est. Code § 308.052.
§ 29.34:2Notice to Secured Creditors
An administrator must, within two months of receiving letters, give notice by certified or registered mail, return receipt requested, to each creditor known to have a claim against the estate that is secured by property of the estate. If the administrator later learns of another secured creditor, he must send notice to that creditor within a reasonable time. The administrator must file with the court a copy of each notice and return receipt along with the administrator’s affidavit stating the notice was mailed as required. Tex. Est. Code § 308.053.
§ 29.34:3Permissive Notice to Unsecured Creditors
Although not required, an administrator may at any time before administration is closed give notice by mail to an unsecured creditor. This notice must contain the date of issuance of letters, the address where claims may be presented, an identification of how the claim should be addressed, and a notice that, unless the claim is presented within 120 days of receipt of the notice, it will be barred. Tex. Est. Code § 308.054. The creditor must give notice of its claim within 120 days of receiving this notice, or the claim will be barred. Tex. Est. Code §§ 355.060–.061. If the administrator chooses to send this notice, it must be mailed by certified or registered mail, return receipt requested. Tex. Est. Code § 308.054. No proof of this permissive notice need be filed with the court.
§ 29.35Claims in Dependent Administration
§ 29.35:1Claim for Money vs. Contingent or Unliquidated Claim
If a claim is not a claim for money, the creditor need not present it within six months of death or present it in statutorily prescribed form. Carter v. Kahler, 902 S.W.2d 85, 87 (Tex. App.—Houston [1st Dist.] 1995, no writ); Donaldson v. Taylor, 713 S.W.2d 716 (Tex. App.—Beaumont 1986, no writ).
A claim for money is a claim for a definite amount based on specific data, not a claim for an undetermined amount. See section 29.22:1 above.
A claim for money against an estate in dependent administration must be authenticated (i.e., supported by an affidavit that the claim is just and that all legal offsets, payments, and credits known to the affiant have been allowed). The attorney should attach a copy of the relevant instrument, account, or voucher if one is available, and the affiant should state the facts on which the claim is founded. Tex. Est. Code §§ 355.004, 355.059. See form 29-1 in this chapter for a form claim.
§ 29.35:3Evidence of Claim Lost or Destroyed
If evidence of the claim has been lost or destroyed, the affiant must state facts regarding loss or destruction of that evidence, as well as the amount, date, and nature of the claim, the due date of the claim, and that the creditor is still the owner of the claim. The claim must also be proved by disinterested testimony given either in open court or by deposition. If a claim is approved or allowed without this disinterested proof, the approval or allowance is void. Tex. Est. Code §§ 355.006, 355.062.
A claim presented on behalf of a corporation or other entity must include an affidavit made by an authorized officer or representative. In addition to the requirements set out in section 29.35:2 above, the affidavit must also state that the affiant has made diligent inquiry and examination. Tex. Est. Code § 355.005.
A creditor may either present a claim for money directly to the administrator or deposit the claim with the court clerk. If it is deposited with the clerk, the clerk must notify the representative of the claim. Tex. Est. Code §§ 355.001–.002. A claim for money that is not barred by the statute of limitations may be presented at any time during the pendency of administration. Tex. Est. Code § 355.001.
§ 29.36:2Deadline for Presentation of Unsecured Claim after Permissive Notice
A creditor holding an unsecured claim against an estate in a dependent administration who has received permissive notice regarding claims against the estate must present his claim within 120 days of receipt of the notice or the claim will be barred. Tex. Est. Code §§ 308.054, 355.060–.061.
§ 29.36:3Deadline for Presentation of Secured Claim
If a secured creditor wants matured secured claim status, he must present his claim electing that status within six months from the date of issuance of letters or four months after receiving notice of the issuance of letters, whichever is later. Failure to present the claim with proper election within this period makes the secured claim a preferred debt and lien. Tex. Est. Code § 355.152.
§ 29.37Handling of Claims by Administrator and Court
§ 29.37:1Allowance or Rejection of Claims by Administrator
Once a creditor presents or files his claim, the administrator has thirty days to either allow or reject the claim in its entirety or to reject part and indicate which part is allowed or rejected. Tex. Est. Code § 355.051. The failure to timely allow or reject the claim constitutes a rejection. Tex. Est. Code § 355.052. The administrator is not required to notify the creditor that the claim has been rejected. Russell v. Dobbs, 354 S.W.2d 373, 376 (Tex. 1962). See section 29.38:1 below regarding strategies for creditors in this situation. If the claim is rejected through inaction but is subsequently proved through suit, the creditor can recover the costs of suit from the administrator individually and can seek the removal of the administrator. Tex. Est. Code § 355.052.
The administrator also has thirty days to object to the form of the claim. Tex. Est. Code § 355.007.
Once an administrator has filed an allowance or rejection of a claim, the court clerk enters the claim on the court’s claim docket. Tex. Est. Code § 355.053. If the administrator has allowed the claim and it has been entered on the claims docket for ten days, it will be either approved in whole or in part or disapproved by the court, and the court will also classify approved claims. Tex. Est. Code § 355.055. See section 29.26 above regarding classification of claims. Judgment cannot be rendered favoring a creditor on a claim for money that has not been presented to the administrator and either rejected or disapproved. Tex. Est. Code § 355.065.
If the claim is barred by limitations, the administrator is not supposed to allow it. If he does, the court should not approve it. Tex. Est. Code § 355.061. Even when a claim is in proper form and allowed, if the court is not satisfied that the claim is just, it must hold a hearing and receive evidence on the issue to determine the justness of the claim. Tex. Est. Code § 355.056.
If the administrator rejects the claim, the court cannot act on the claim until it is established by suit. See section 29.39 below regarding suit on a rejected claim.
§ 29.38Claims Handling and Payment
If a claim is rejected in whole or in part by the administrator, the creditor must institute suit within ninety days of the rejection or the claim is barred. Tex. Est. Code § 355.064. See section 29.37:1 above regarding how claims can be either actively rejected or rejected through the inaction of the administrator. Although the administrator has thirty days in which to allow or reject the claim, he is free to file his rejection anytime after receiving it and does not have to inform the creditor of his rejection. Russell v. Dobbs, 354 S.W.2d 373, 376 (Tex. 1962). Also, if the administrator allows the claim after the thirty-day period expires, the claim is still deemed rejected. Lusk v. Mintz, 625 S.W.2d 774, 776 (Tex. App.—Houston [14th Dist.] 1981, no writ).
Administrators have been known to reject a claim immediately, starting the ninety-day limitations period before the unwary creditor knows it has begun. Therefore, after the thirty-day period expires, the attorney should check the court file to determine the administrator’s disposition, if any, of the claim. It is recommended that the petition be prepared at the same time the claim is prepared so it can be filed as soon as possible after ascertaining that the claim has been rejected. See section 29.39 below regarding suits on rejected claims.
If the creditor’s suit is barred by the ninety-day rule, the creditor may still proceed against any joint debtor. See Albiar v. Arguello, 612 S.W.2d 219, 220 (Tex. Civ. App.—Eastland 1980, no writ).
The ninety-day limitation does not apply to claims other than claims for money. Lusk, 625 S.W.2d at 776; National Guaranty Loan & Trust Co. v. Fly, 69 S.W. 231 (Tex. Civ. App. 1902, no writ).
§ 29.38:2Collection of Approved Claims
If a creditor’s claim has been approved or established by suit and the administrator does not pay the claim, the creditor may petition the court to be paid at any time after twelve months from the granting of letters testamentary. Tex. Est. Code § 355.107(a). If the estate has sufficient funds on hand, and after the administrator has been cited to appear and show cause why the creditor should not be paid, the court may order payment to the creditor from those funds. Tex. Est. Code § 355.107(c)
A suit on a rejected claim should be brought in the court in which administration of the estate is pending. Tex. Est. Code § 355.064(a); Bailey v. Cherokee County Appraisal District, 862 S.W.2d 581, 585 (Tex. 1993); Howe State Bank v. Crookham, 873 S.W.2d 745 (Tex. App.—Dallas 1994, no writ); but see Phifer v. Nacogdoches County Central Appraisal District, 45 S.W.3d 159, 169–70 (Tex. App.—Tyler 2000, pet. denied) (exception exists for suit to collect delinquent taxes on property located in different county from where probate located).
§ 29.39:2Pleading Requirements
The suit should be filed against the administrator of the estate and should be styled, for example, “Jane Doe, Administrator of the estate of John Doe, deceased.” An estate is not a legal entity and may not be sued. See Henson v. Estate of Crow, 734 S.W.2d 648, 649 (Tex. 1987); Price v. Estate of Anderson, 522 S.W.2d 690, 691 (Tex. 1975).
The petition should state the elements supporting the underlying cause of action—for example, a sworn account. Several additional elements must also be pleaded: the presentation of the claim to the administrator, its rejection, and the fact that ninety days have not elapsed since its rejection. Butler v. Summers, 253 S.W.2d 418, 422 (Tex. 1952); Podgoursky v. Frost, 394 S.W.2d 185 (Tex. Civ. App.—San Antonio 1965, writ ref’d n.r.e.). Although pleading that all conditions precedent have occurred or have been performed would seem to fulfill these pleading requirements (see Tex. R. Civ. P. 54), the manual committee is not aware of Texas case law in support. The better practice, therefore, is to plead the specific procedural acts or omissions giving rise to the suit. See form 29-2 in this chapter for a petition that not only pleads the elements specifically but also contains an “all conditions precedent” allegation.
No execution may issue on a claim established by suit. The creditor should request that the final judgment in his favor state that it is to be paid in the due course of administration; he should also request that the judgment be entered in the claims docket as if originally approved for classification and payment. Tex. Est. Code § 355.066; Tex. R. Civ. P. 313.
Costs for suits on claims are allocated as follows:
1.If the claim is allowed and approved, the estate pays.
2.If the claim is allowed but disapproved, the creditor pays.
3.If the claim is rejected but established by suit, the estate pays, unless the claim was rejected by operation of law because the administrator failed to act timely, in which case the administrator, individually, pays the costs (see Tex. Est. Code § 355.052).
4.If the claim is rejected but not established by suit, the creditor pays.
5.In suits to establish a claim after rejection in part, if the creditor fails to recover a judgment for a greater amount than was allowed or approved, the creditor pays.
§ 29.40Foreclosure and Other Court-Supervised Sales
A creditor holding a claim secured by a valid lien that has been allowed and approved or established by suit may apply to the probate court to sell the property or as much of it as is necessary to satisfy the claim. The clerk will issue citation requiring the administrator to appear and show cause why the application should not be granted. If it appears advisable to discharge the lien out of the general assets of the estate or to refinance the claim, the court will so order; otherwise, the property will be ordered sold at public or private sale. Tex. Est. Code §§ 356.201–.203. Although the sale is to be performed “as in an ordinary sale of real estate,” there is no other statutory reference regarding its limitation to real property; a creditor holding a security interest in personal property might consider using this statute to force the sale of the property.
The property can be either real or personal, but if real property is selected to be sold, it will be that which the court deems most advantageous to the estate to sell. Tex. Est. Code § 356.257. No property of any kind may be sold without court order. Tex. Est. Code § 356.001. If the court orders a sale, the proceeds will be used to pay the claim to the extent that it is not needed to discharge the liabilities of higher-priority claims—unless the lien is a preferred debt and lien. Tex. Est. Code § 355.104. In that event, higher-priority claims are not paid before the lien claimant is paid. See Tex. Est. Code § 355.154. An application and an order for court-ordered sale of collateralized property are at forms 29-3 and 29-4 in this chapter.
The deed that conveys title to real property must refer to and identify the decree of the court approving the sale. See Tex. Est. Code § 356.557.
§ 29.40:2Preferred Debt and Lien
If a lien is considered as a preferred debt and lien and the property is not sold within six months after the granting of letters, the administrator is supposed to pay all accrued maturities and perform all other contractual terms. If he fails to do so, the creditor may apply to have the property sold or foreclosed. Tex. Est. Code § 355.155. If the creditor requests foreclosure, the application must be supported by the creditor’s affidavit. Tex. Est. Code § 355.156. See form 29-5 in this chapter for an application and affidavit. The clerk must issue citation to the administrator and any other person described in the application as having a debt secured by the property; these people must be personally served. Tex. Est. Code § 355.157.
At the hearing, after determining that there is a default, the court must—
1.require the sale of the property subject to the unmatured part of the debt and apply the proceeds of the sale to the liquidation of the maturities;
2.require the sale of the property free of the lien and apply the proceeds to the payment of the whole debt; or
3.authorize foreclosure by the creditor as allowed by the terms of the mortgage instrument or security agreement or as authorized by law. The court may fix a minimum price for the property that does not exceed the property’s fair market value.
Tex. Est. Code §§ 355.158–.159. See forms 29-6 through 29-8 for an order authorizing sale of property, a report of sale, and a decree confirming sale.
If foreclosure is authorized and the property is not sold because no bid for the minimum amount was made, the creditor may file another application. The court, in its discretion, may eliminate or modify the minimum price requirement and permit another foreclosure sale. Tex. Est. Code § 355.160.
§ 29.41Claims by Administrator
The provisions of the Texas Estates Code regarding presentment of claims do not apply to any claim of an administrator. However, the administrator must file a verified claim within six months after his qualification, or the claim is barred. Tex. Est. Code § 355.201(a)–(b).
[Sections 29.42 through 29.50 are reserved for expansion.]
IV. Independent Administration
§ 29.51Nature of Independent Administration
Independent administration is the administration of an estate with limited court involvement. See Tex. Est. Code §§ 401.001–.002; Cunningham v. Parkdale Bank, 660 S.W.2d 810 (Tex. 1983). It is usually created if the decedent providing in his will that no action shall be had in relation to the settlement of his estate other than the probate and recording of his will and the return of any required inventory, appraisement, and list of claims of the estate. Tex. Est. Code § 401.001. However, no special language is required so long as it shows the decedent’s intent that the administration be free of court supervisions. See Long v. Long, 169 S.W.2d 763, 764 (Tex. Civ. App.—San Antonio 1943, writ ref’d); see also In re Dulin’s Estate, 244 S.W.2d 242, 244 (Tex. Civ. App.—Galveston 1951, no writ) (holding that merely naming a person “as independent executor” was sufficient). Also, the distributees of a decedent, testate or intestate, may consent to independent administration. Tex. Est. Code §§ 401.002–.004.
If the decedent dies intestate and the heirs desire independent administration, they must first obtain a determination of heirship by judgment to avoid dependent administration. Tex. Est. Code § 401.003(b). The heirship proceeding and appointment of independent administrator are often done in the same hearing. An independent personal representative appointed by will is an independent executor, whereas one appointed in another manner is an independent administrator. See Tex. Est. Code § 22.017.
Just as it is possible for an executor to be named in a dependent administration, an administrator may be named in an independent administration. Generally, though, the personal representative in an independent administration is an executor named in the will. For convenience, the term “executor” will be used in this part IV. to refer to the personal representative in an independent administration.
See section 29.4 above regarding the rights and duties of personal representatives generally and whether bond will be required.
An executor has the power to perform any act that a court-supervised executor or administrator could perform only under court order. Tex. Est. Code § 402.002; see also Rowland v. Moore, 174 S.W.2d 248 (Tex. 1943). An independent executor or administrator therefore has full authority to deal with creditors and resolve claims. See Tex. Est. Code § 351.051. See section 29.33:1 above regarding powers of an administrator.
An executor has the duty to give proper notice to creditors and to approve, classify, and pay or reject claims against the estate in order of priority. Tex. Est. Code § 403.051. See section 29.53 below regarding notice to creditors. See section 29.26 above for classification of claims.
§ 29.52:3Liabilities of Executor
An executor is not required to give bond if the will states that no bond is necessary, unless it is shown that he has mismanaged the estate, has betrayed or is about to betray his trust, or is disqualified in some other way. Tex. Est. Code § 404.002. If the executor is not required to give bond, the heirs or other beneficiaries of an estate under independent administration may be required to do so if requested by any person having a claim against the estate. If bond is not given as ordered, the court can order a dependent administration. A creditor may sue on the bond if a claim goes unsatisfied. Tex. Est. Code § 403.060. Heirs and beneficiaries are rarely required to give bond. See Kauffman v. Wooters, 13 S.W. 549 (Tex. 1890).
§ 29.53:1Notice by Publication or Posting
An executor must, within one month of receiving letters, publish a notice of administration. If there is no newspaper of general circulation in the county in which letters were issued, notice must be posted. Tex. Est. Code §§ 308.051, 403.051(a)(1). A copy of the notice together with the publisher’s affidavit must be filed with the court. Tex. Est. Code § 308.052.
§ 29.53:2Notice to Secured Creditors
An executor must, within two months of receiving letters, give notice by certified or registered mail, return receipt requested, to each creditor known to have a claim against the estate that is secured by property of the estate. If the executor later learns of another secured creditor, he must send notice to that creditor within a reasonable time. Tex. Est. Code §§ 308.053, 403.051(a)(1). The administrator must file with the court a copy of each notice and return receipt along with the administrator’s affidavit stating the notice was mailed as required. Tex. Est. Code § 308.053.
§ 29.53:3Permissive Notice to Unsecured Creditors
Although not required, an executor may at any time before administration is closed give notice by mail to an unsecured creditor. This notice must contain the date of issuance of letters, the address where claims may be presented, an identification of how the claim should be addressed, and a notice that, unless the claim is presented within 120 days of receipt of the notice, it will be barred. Tex. Est. Code § 308.054, 403.051(a)(2). The creditor must give notice of its claim within 120 days of receiving this notice, or the claim will be barred. Unlike the permissive notices in dependent administrations, in order to effectively bar the claim within 120 days the notice to unsecured creditors in independent administrations must include a statement that a claim must be presented by one of the methods prescribed in Texas Estates Code chapter 403, subchapter B (i.e., by an authenticated written instrument that is hand-delivered with proof of receipt or mailed by certified mail, return receipt requested, to the executor or the executor’s attorney; by a pleading filed in a lawsuit; or by an authenticated written instrument or a pleading that is filed in the court in which the estate is pending). Tex. Est. Code § 403.051(b); see also Tex. Est. Code § 403.056. If the administrator chooses to give this notice, it must be mailed by certified or registered mail, return receipt requested. Tex. Est. Code § 308.054. No proof of this permissive notice need be filed with the court.
§ 29.54Claims in Independent Administration
Although presentment of claims in an independent administration is permitted, it is not required, except by specific provisions of the Texas Estates Code. Tex. Est. Code ch. 403, subch. B; see Ditto Investment Co. v. Ditto, 293 S.W.2d 267, 269 (Tex. Civ. App.—Fort Worth 1956, no writ). For example, see sections 29.54:2 and 29.54:3 below.
Where notice to the independent executor is required, it must be contained in (1) an authenticated written instrument that is hand-delivered with proof of receipt or mailed by certified mail, return receipt requested, to the independent executor or the executor’s attorney, (2) a pleading filed in a lawsuit with respect to the claim, or (3) an authenticated written instrument or pleading filed in the court in which the administration of the estate is pending. Tex. Est. Code § 403.056.
The creditor may enforce payment by filing suit against the independent executor. Bunting v. Pearson, 430 S.W.2d 470 (Tex. 1968); El Paso National Bank v. Leeper, 538 S.W.2d 803, 806 (Tex. Civ. App.—El Paso 1976, writ ref’d n.r.e.). If such a suit is filed, the executor is not required to plead until after six months from the creation of the independent administration and the issuance of letters testamentary. Tex. Est. Code § 403.059.
In independent administrations, the statute of limitations is not tolled by the presentment of a claim, notice, or statement to the executor; it is only tolled by the written approval of the claim by the executor, a pleading filed in a suit pending at the decedent’s death, or the filing of a suit against the executor. Tex. Est. Code § 403.057.
Practice Note: Generally, the procedures for establishing claims and suits on rejected claims that apply to dependent administrations do not apply to independent administrations. See Tex. Est. Code § 403.058; see also Bunting, 430 S.W.2d at 473. In an independent administration, there is no requirement that the creditor’s claim be presented before it can be sued on, and the ninety-day requirement before filing suit does not apply. Tex. Est. Code §§ 403.058–.059. For a detailed explanation of the difference between claims against independently and dependently administered estates, see Stanley M. Johanson, Johanson’s Texas Estates Code Annotated 359–60 (Thomson Reuters 2015).
§ 29.54:2Deadline for Presentation of Unsecured Claim after Permissive Notice
A creditor holding an unsecured claim against an estate in independent administration who has received permissive notice regarding claims against the estate must give notice to the executor of the nature and amount of his claim within 120 days of receipt of the notice or the claim will be barred. Tex. Est. Code §§ 403.055–.056.
§ 29.54:3Deadline for Presentation of Secured Claim
If a secured creditor wants matured secured claim status, he must present his claim electing that status within six months from the date of issuance of letters or four months after receiving notice of the issuance of letters, whichever is later. Tex. Est. Code § 403.052. In addition to giving the notice, a creditor whose claim is secured by real property and who seeks matured secured claim status must record a notice of the creditor’s election in the deed records of the county in which the real property is located. Tex. Est. Code § 403.052. If no election to be a matured secured claim is made, or the election is made but not within the prescribed period or is made within the prescribed period but the creditor has lien against real property and fails to record notice of the claim in the deed records, the claim will be treated as a preferred debt and lien. Tex. Est. Code § 403.052.
See section 29.23 above regarding matured secured claim and preferred debt and lien status generally.
§ 29.55Suits against Independent Estate
In counties with a statutory probate court, all suits against an independent executor or administrator regarding a claim against the estate must be filed in the probate court. In counties without a statutory probate court, the suits must be filed in the county courts with jurisdiction over probate proceedings, if any. Tex. Est. Code §§ 31.001(4), 31.002(4), 32.001–.005.
§ 29.55:2Creditor’s Pleading Requirements
There is no requirement that a creditor present his claim against an independently administered estate before it can be sued on. With one exception, a suit against an independent executor should look essentially like any other collections suit. See Tex. Est. Code §§ 403.058–.059. See also Bunting v. Pearson, 430 S.W.2d 470 (Tex. 1968); Collins v. State, 506 S.W.2d 293 (Tex. Civ. App.—San Antonio 1973, no writ). The exception is in the prayer, in which the creditor should pray that execution issue against property of the estate in the hands of the executor (or his successor) in the due course of administration. Tex. Est. Code § 403.059; Tex. R. Civ. P. 313. See form 29-9 in this chapter for a sample petition.
§ 29.55:3Executor’s Pleading Requirements
Although the suit may be brought at any time not otherwise barred by limitations, the executor does not have to plead until after six months from the date independent administration was created and the order appointing an executor was entered. Tex. Est. Code § 403.059.
A secured creditor has the same right of nonjudicial foreclosure that he would have if the debtor were alive. See Pearce v. Stokes, 291 S.W.2d 309, 310–11 (Tex. 1956). The executor, however, can enjoin such a foreclosure sale if the estate is insolvent and if the sale would result in claims being paid out of statutory priority. Farmers’ & Merchants’ National Bank v. Bell, 71 S.W. 570 (Tex. Civ. App. 1902, writ ref’d).
If the creditor elects matured secured claim status, his right to foreclose may be limited if foreclosure would prevent the preferential payment of allowances or Class 1 or Class 2 claims. Tex. Est. Code § 355.153. If the secured claim is classed as a preferred debt and lien, the creditor may not seek a deficiency. See Wyatt v. Morse, 102 S.W.2d 396, 398–99 (Tex. 1937). Additionally, the creditor whose claim is a preferred debt and lien cannot conduct a nonjudicial foreclosure sale in the first six months after letters are issued. Tex. Est. Code § 403.054.
For a judicial foreclosure, the creditor should sue both the executor and the distributees or heirs taking title to the collateral as determined by the court sitting in probate, either by will or heirship determination. The suit should be brought in a court having jurisdiction over matters relating to a probate proceeding. In counties with a statutory probate court, the suit should be brought in the probate court. See Tex. Est. Code chs. 31, 32.
[Sections 29.57 through 29.60 are reserved for expansion.]
If a person is totally without capacity to care for himself, to manage his property, to operate a motor vehicle, to make personal decisions regarding his residence, and to vote in a public election, the court may appoint a guardian of his person, estate, or both. Tex. Est. Code § 1101.151. If he lacks capacity to do some but not all tasks necessary to care for himself or to manage his property, with or without supports and services, the court can appoint a guardian with limited powers. Tex. Est. Code § 1101.152. The person for whom a guardian is appointed is referred to as a “ward.” Tex. Est. Code §§ 22.033, 1002.030.
A guardian has a number of statutory powers. For collections purposes, they include the power to—
1.renew or extend any obligation owed by the ward;
2.make compromises or settlements in relation to property or claims in dispute or litigation;
3.compromise or pay in full any secured claim that has been allowed and approved by conveying the collateral to the secured creditor in satisfaction of the claim; and
4.abandon the administration of property of the estate that is burdensome or worthless. If the abandoned property is collateral securing a claim, it may be foreclosed on without further order of court.
These powers may be exercised only after written application to the probate court and authorization by court order. Tex. Est. Code § 1151.102.
For purposes of creditors’ claims against the estate, a guardian must—
1.give notice of his appointment (as described in section 29.63 below) (Tex. Est. Code §§ 1153.001–.004);
2.prepare and file an inventory, appraisement, and list of claims with the probate court within thirty days of qualifying as guardian (Tex. Est. Code §§ 1154.051–.052);
3.report to the court annually regarding the claims allowed, paid, rejected, or sued on, as well as a variety of other matters incident to the estate (Tex. Est. Code ch. 1163, subch. A);
4.pay claims allowed and approved or established by suit, in order of priority (Tex. Est. Code §§ 1157.101, 1157.103);
5.settle and close the guardianship when (a) the ward dies; (b) a minor ward becomes an adult by age, emancipation, or marriage; (c) the ward is decreed by the court to be restored to full capacity; (d) the spouse of a married ward qualifies as survivor in community and the ward does not own separate property; (e) the estate is fully expended; (f) the foreseeable income to the ward or the estate is so negligible as to make the guardianship burdensome; (g) the assets are placed in a management trust or pooled trust; or (h) the court otherwise determines the guardianship is unnecessary (Tex. Est. Code § 1204.001); and
6.file a final verified account for final settlement of the estate (Tex. Est. Code §§ 1204.101–.102).
§ 29.63:1Notice by Publication
A guardian must, within one month of receiving letters, publish a notice of guardianship. If no newspaper of general circulation is published in the county in which letters were issued, notice must be posted. Tex. Est. Code § 1153.001. A copy of the notice together with the publisher’s affidavit must be filed with the court. Tex. Est. Code § 1153.002.
§ 29.63:2Secured Creditors and Claims of Which Guardian Has Actual Knowledge
Notice by certified or registered mail, return receipt requested, must be given to all persons having a claim for money against a ward’s estate if either the claim is secured by a deed of trust, mortgage, or vendor’s, mechanic’s, or other contractor’s lien on real estate belonging to the estate, or the guardian has actual knowledge of the claim. This notice must be given within four months of the receipt of letters. The guardian must file with the court a copy of each notice to a secured creditor and return receipt along with the guardian’s affidavit stating the notice was mailed as required. Tex. Est. Code § 1153.003. Additionally, although not required, a guardian may include in the required notice to an unsecured creditor that his claim will be barred unless presented within 120 days of receipt of the notice. Tex. Est. Code § 1153.004. The creditor must give notice of its claim within 120 days of receiving this notice, or the claim will be barred. Tex. Est. Code § 1157.060. No proof of this permissive notice need be filed with the court.
§ 29.63:3One Notice Sufficient
If notice has been given by a former or co-guardian, repeated or additional notice need not be given. Tex. Est. Code § 1153.005(a).
§ 29.63:4Failure of Guardian to Give Notice
If a guardian fails to give any required notice, the guardian and any sureties on his bond will be liable for damages suffered by any person because of that failure unless it appears that the creditor had actual notice. Tex. Est. Code § 1153.005(b).
A “claim” includes a liability against the estate of a ward. Tex. Est. Code § 1002.005. Except in the notice provisions set out in section 29.63:2 above, there is no distinction in guardianships between claims for money and contingent or unliquidated claims.
Except as provided by section 1157.102 of the Texas Estates Code, a claim for money against a guardianship must be authenticated (i.e., supported by an affidavit that the claim is just and that all legal offsets, payments, and credits known to the affiant have been allowed). The attorney should attach a copy of the relevant instrument, account, or voucher if one is available, and the affiant should state the facts on which the claim is founded. Tex. Est. Code § 1157.004. See form 29-1 in this chapter for a form claim. See also section 29.64:5 below for a short discussion of section 1157.102 of the Texas Estates Code.
§ 29.64:3Evidence of Claim Lost or Destroyed
If evidence of a claim has been lost or destroyed, the affiant must state facts regarding loss or destruction of that evidence, as well as the amount, date, and nature of the claim, the due date of the claim, and that the creditor is still the owner of the claim. The claim must also be proved by disinterested testimony given either in open court or by deposition. If a claim is approved or allowed without this disinterested proof, the approval or allowance is void. Tex. Est. Code §§ 1157.006, 1157.062.
A claim presented on behalf of a corporation must include an affidavit made by the cashier, treasurer, or managing official of the corporation. In addition to the requirements set out in section 29.64:2, the affidavit must also state that the affiant has made diligent inquiry and examination. Tex. Est. Code § 1157.005.
§ 29.64:5Unauthenticated Claim
A guardian may pay an unauthenticated claim if he believes it to be just, but he and his sureties will be liable for the amount paid if the court subsequently determines the claim is unjust. Tex. Est. Code § 1157.102. Claims for daily living expenses and utility bills, for instance, might be paid in this manner without submission of an authenticated claim to the guardian or the court.
§ 29.65:1When Claims May Be Presented
A claim against a guardianship estate may be presented at any time before the closing of the guardianship if suit on the claim would not be barred by limitation. Tex. Est. Code § 1157.001.
§ 29.65:2Presentation of Secured Claim
A secured creditor desiring matured secured claim status must present a claim electing that status within the time provided by law, or the claim will be treated as a preferred debt and lien. The creditor may choose to elect preferred debt and lien status. Tex. Est. Code § 1157.151.
§ 29.66Handling of Claims by Guardian and Court
§ 29.66:1Allowance or Rejection of Claims by Guardian
Once a creditor presents or files his claim, the guardian has thirty days to either allow or reject the claim in its entirety or reject part and indicate which part is allowed or rejected. Tex. Est. Code § 1157.051. The failure to timely allow or reject the claim constitutes a rejection. Tex. Est. Code § 1157.052. The guardian is not required to notify the creditor that the claim has been rejected. See Russell v. Dobbs, 354 S.W.2d 373, 376 (Tex. 1962) (decedent’s estate). If the claim is rejected through inaction but subsequently proved through suit, the creditor can recover the costs of suit from the guardian individually, and can seek to have the guardian removed. Tex. Est. Code § 1157.052.
The guardian also has thirty days to object to the form of the claim. Tex. Est. Code § 1157.007.
Once a guardian has filed an allowance or rejection of the claim, the court clerk enters the claim on the court’s claim docket. Tex. Est. Code § 1157.053. If the guardian has allowed the claim and it has been entered on the claims docket for ten days, it will be either approved in whole or in part or disapproved by the court, and the court will also classify approved claims. Tex. Est. Code § 1157.055. See section 29.66:3 below regarding classification of claims. Judgment cannot be rendered favoring a creditor on a claim for money that has not been presented to the guardian and wholly or partly rejected. Tex. Est. Code § 1157.064(a).
If the claim is barred by limitations, the guardian is not supposed to approve it. If he does, the court should not allow it. Tex. Est. Code § 1157.061. Even though the claim is in proper form and approved by the guardian, if the court is not satisfied that the claim is just, it must hold a hearing and receive evidence on the issue to determine the justness of the claim. Tex. Est. Code § 1157.056.
If the guardian rejects the claim, the court cannot act on the claim until it is established by suit. See section 29.67 below regarding suit on a rejected claim.
§ 29.66:3Order of Payment of Claims
Guardians must pay claims that are allowed and approved or established by suit in the following order:
1.expenses for the care, maintenance, and education of the ward or the ward’s dependents;
2.funeral expenses and expenses of the last illness of a deceased ward, subject to prior payment of claims allowed and approved or established by suit before the ward’s death;
3.expenses of administration; and
4.other claims against the ward or the ward’s estate.
If the estate is insolvent, the guardian must give first priority to the payment of claims relating to administration of the guardianship. Tex. Est. Code § 1157.103(b).
A suit on a rejected claim should be brought in the court with jurisdiction over the guardianship. Tex. Est. Code § 1157.063; see also Tex. Est. Code § 1022.002.
§ 29.67:2Deadline for Filing Suit
As with a dependent administration, a creditor has ninety days to file suit after the guardian rejects the claim in whole or in part; otherwise, the claim will be barred. Tex. Est. Code § 1157.063.
§ 29.67:3Pleading Requirements
The suit should be filed against the guardian in that capacity and should be styled, for example, “Jane Doe, Guardian of the Estate of John Doe.” See form 29-2 in this chapter for a petition. Otherwise, the pleadings should follow the form used for suing a dependent administrator. See Tex. Est. Code § 1157.063. See also section 29.39:2 above.
Costs for suits on claims are allocated as follows:
1.If the claim is allowed and approved, the guardianship estate pays.
2.If the claim is allowed but disapproved, the creditor pays.
3.If the claim is rejected but established by suit, the estate pays, unless the claim was rejected by operation of law because the guardian failed to act timely, in which instance the guardian, individually, pays (see Tex. Est. Code § 1157.052).
4.If the claim is rejected but not established by suit, the creditor pays.
5.In suits to establish a claim after rejection in part, if the creditor fails to recover a judgment for a greater amount than was allowed or approved, the creditor pays.
§ 29.68Sale of Guardianship Property
On written application of a creditor who holds a secured claim or lien that has been allowed and approved, the court may order the sale of as much of the property as necessary to satisfy the creditor’s claim unless the guardian can show cause why it should not be sold. If it appears to the court that it would be advisable to discharge the lien out of the general assets of the estate or that it be refinanced, the court may so order. Tex. Est. Code ch. 1158, subch. E.
A nonjudicial foreclosure sale during the pendency of a guardianship is void. Crowley v. Redmond, 41 S.W.2d 274, 278 (Tex. Civ. App.—Fort Worth 1931), aff’d, 70 S.W.2d 1113 (Tex. 1934).
[Sections 29.69 and 29.70 are reserved for expansion.]
§ 29.71Multiple-Party Accounts
Multiple-party accounts are joint accounts, convenience accounts, pay-on-death accounts, and trust accounts and include checking accounts, savings accounts, certificates of deposit, share accounts, and other similar arrangements. Tex. Est. Code §§ 113.001, 113.004.
A joint account is an account payable on request to one or more parties whether there is a right of survivorship or not. Tex. Est. Code § 113.004(2). A joint account belongs to the parties, during their lifetimes, in proportion to the net contributions each party makes, unless there is clear and convincing evidence of a different intent. Tex. Est. Code § 113.102. “Net contribution” is defined at Tex. Est. Code § 113.003. If the joint account contains a written agreement for right of survivorship, the interest of the party who dies vests immediately in the surviving cosigner(s). Tex. Est. Code § 113.151.
If an account is established by one or more parties in the names of the parties and one or more convenience signers and the terms of the account provide that the amounts on deposit are paid or delivered to the parties or to the convenience signers “for the convenience” of the parties, the account is a convenience account. Tex. Est. Code § 113.004(1).
The making of a deposit in a convenience account does not affect title to the deposit. A party establishing a convenience account is not considered to have made a gift of any portion of the deposit to the convenience signer. Tex. Est. Code § 113.105. Otherwise, ownership of a convenience account is established by each account holder’s net contributions, as in other joint accounts. See Tex. Est. Code § 113.102.
A pay-on-death (P.O.D.) account (including a transfer on death or T.O.D. account) is payable on request to one person during his lifetime, then, on that person’s death, to one or more persons, called “P.O.D. payees.” Tex. Est. Code § 113.004(4). The account belongs to the original payee during his lifetime and not to the P.O.D. payees. Tex. Est. Code § 113.103. If there are two or more original payees, then each payee’s interest is proportional to the amount of his net contribution, as in other joint accounts. Tex. Est. Code § 113.102.
A trust account, for purposes of the multiple-party account provisions of the Estates Code, is an account in the name of one or more parties as trustee for one or more beneficiaries in which the relationship is established by the form of the account and the deposit agreement with the financial institution and there is no subject of the trust other than the amounts on deposit in the account. It does not include a regular trust account under a testamentary trust or a trust agreement having significance apart from the account or a fiduciary account arising from a fiduciary relationship such as attorney and client. Tex. Est. Code § 113.004(5). Unless a contrary intent is shown by the terms of the account or deposit agreement or there is other clear and convincing evidence of an irrevocable trust, a trust account belongs beneficially to the trustee during his lifetime. If there are two or more trustees, beneficial ownership is determined by their net contributions to the account. Tex. Est. Code § 113.104.
§ 29.71:6Rights of Creditors, Survivors, and Personal Representatives to Reach Deceased’s Interest in Multiple-Party Account
A multiple-party account is not effective against the claim of a secured creditor who has a lien on the account, but it may be liable for certain estate taxes. Tex. Est. Code § 113.252(a). Except for a convenience signer, a party to a multiple-party account may pledge it without joinder of other parties with a substantial interest in the account. Tex. Est. Code § 113.251(a), (b). If a secured interest is perfected, a secured creditor that is an FDIC-insured financial institution must send written notice of the account’s pledge to the other parties to the multiple-party account; however, notice does not have to be given to a P.O.D. payee, beneficiary, or convenience signer. Tex. Est. Code § 113.251(c), (d).
Generally, however, if other assets of a deceased party’s estate are insufficient to pay debts, taxes, claims, and expenses of administration, including surviving spouse and minor children allowances, the deceased’s interest in a multiple-party account can be recovered by the personal representative from either the account itself or the subsequent payee of the account according to the account’s terms. Tex. Est. Code § 113.252(a), (b). Until the financial institution receives written notice from the representative stating the amounts needed to pay debts, taxes, claims, and expenses of administration, it is free to pay account proceeds according to the terms and nature of the account and agreement. Payees are liable only to the extent of funds actually received from the account. Tex. Est. Code § 113.253.
To recover these amounts, the representative must first have received a demand for payment from either a surviving spouse, a creditor of the decedent, or one acting for the decedent’s minor child. No recovery proceeding may commence more than two years after death. Amounts recovered by the representative are distributed as part of the decedent’s estate. Tex. Est. Code § 113.252(c), (d).
If the creditor is aware of amounts passing outside probate to payees under any of these multiple-party accounts, he should consider demanding that the personal representative take steps to recover these funds into the probate estate. The efficacy of taking this action must be balanced against the amount of money the creditor will recover after expenses of administration and statutory allowances are paid.
§ 29.71:7Liability of and Offset to Financial Institutions
A detailed discussion of the rights and liabilities of financial institutions regarding payment of funds from multiple-party accounts to various payees is beyond the scope of this manual. In general, the financial institution will not be liable for disbursements made in good faith to parties appearing to have rights in the account. Tex. Est. Code ch. 113, subch. E. Without having to present a claim, a financial institution has a right to offset debt against the account of any amount in proportion to that to which the party was entitled. Tex. Est. Code § 113.210; Bandy v. First State Bank, 835 S.W.2d 609, 622 (Tex. 1992).
§ 29.72Community Property with Right of Survivorship
Spouses may agree at any time that title to all or part of their community property, then existing or to be acquired, will vest in the surviving spouse on death. Tex. Est. Code § 112.051. A detailed discussion of how this right of survivorship is created, proved, or revoked is beyond the scope of this manual. Property passing to a surviving spouse in this manner is removed from the probate estate. See Tex. Est. Code §§ 112.001–.253
As with a multiple-party account, the personal representative of a deceased spouse can demand recovery of amounts paid to a surviving spouse under such a survivorship arrangement if the estate is otherwise unable to pay debts, taxes, or expenses of administration. Otherwise, the community property subject to the sole or joint management, control, or disposition of a spouse during marriage continues to be subject to the liabilities of that spouse on death without regard to a right of survivorship in the decedent’s spouse. Tex. Est. Code §§ 112.252–.253.
Although a trustee holds legal title to trust property, that property is not liable for the trustee’s obligations. Tex. Prop. Code § 114.0821; Adams v. Williams, 248 S.W. 673 (Tex. 1923). The beneficiary holds equitable title in trust property; unless the instrument creating the trust made it a spendthrift trust, the trust property will be liable for the beneficiary’s debts. See Estes v. Estes, 267 S.W. 709 (Tex. 1924).
A spendthrift trust cannot be reached by the beneficiary’s creditors unless the settlor created it with himself as beneficiary. Bank of Dallas v. Republic National Bank of Dallas, 540 S.W.2d 499, 501 (Tex. Civ. App.—Waco 1976, writ ref’d n.r.e.). See also Tex. Prop. Code § 112.035.
A living trust is an inter vivos trust taking effect during the settlor’s lifetime, with vesting provisions for the trust property at his death. Because the settlor no longer owns the property—the trust owns it—the property is not part of his estate at death.
§ 29.73:4Notice to Trust Beneficiaries
In an action brought on a contract executed by a trustee or against a trustee as representative of the trust for a tort committed in the course of the trust’s administration, the plaintiff must give notice to each beneficiary known to have a present or contingent interest. This notice must be given either within thirty days after the action is commenced or at any other time fixed by the court that is more than thirty days before judgment. Tex. Prop. Code § 115.015(a). It must be sent by registered or certified mail, return receipt requested. The plaintiff should make a written request to the trustee-defendant for the names and addresses of all such beneficiaries; the trustee must provide this list within ten days from the date of the request. Tex. Prop. Code § 115.015(b).
§ 29.74Life Insurance Proceeds
Life insurance proceeds are exempt from execution, attachment, garnishment, or other process. Tex. Ins. Code §§ 1108.051–.053.
§ 29.75Qualified Savings Plan Benefits
A person’s right to the assets held in or to receive payments from a “qualified savings plan” is exempt from attachment, execution, and seizure to the extent the plan is exempt from federal income taxation under the Internal Revenue Code of 1986 or to the extent federal income tax on a person’s interest in the plan is deferred until actual payment of benefits to the person. Tex. Prop. Code § 42.0021. Section 42.0021(a) contains a list of the types of pension, retirement, health or education savings, or ABLE accounts included as qualified savings plans. The exemption, however, does not apply to voluntary contributions to the plan by the beneficiary in excess of section 473 of the Internal Revenue Code of 1986 or to the accrued earnings on such excess contributions. Tex. Prop. Code § 42.0021(d). Amounts distributed from a qualified savings plan are exempt from attachment, execution, and seizure for a creditor’s claim for sixty days after the date of distribution and will continue to be exempt if the debtor makes a qualified rollover contribution of the distributed amount. Tex. Prop. Code § 42.0021(e).
§ 29.76Transfer on Death Deeds
Texas law has never recognized a right of survivorship in real property; consequently, when a person dies owning a house or land, there typically has to be an estate administration, muniment of title, or affidavit of heirship. A person owning real property may execute a transfer on death deed and file it in the deed records of the county where the real property is located. See Tex. Est. Code §§ 114.001–.106. In the deed, the transferor may name one or more primary beneficiaries and one or more contingent beneficiaries and state that the transfer of the property to the beneficiaries is to occur upon the transferor’s death. The deed is revocable, nontestamentary, and must be recorded before the transferor’s death. At the transferor’s death, the property passes to the surviving beneficiary or beneficiaries subject to all encumbrances, mortgages, and liens in place against the property at the transferor’s death; however, the personal representative of the transferor’s estate could enforce higher-priority claims or family allowances against the property. See Tex. Est. Code §§ 114.104, 114.106.
[Sections 29.77 through 29.80 are reserved for expansion.]
§ 29.81Debtor as Beneficiary of Estate
A creditor may discover that a debtor is a beneficiary or an heir of an estate and has not yet received his bequest. The creditor should research the probate file to ascertain the status of the estate, what the debtor is entitled to receive, and when the bequest might be paid.
If the creditor learns that the debtor has inherited or will inherit assets, he should consider using turnover or injunctive relief as a means of reaching those assets. See part V. in chapter 27 of this manual regarding turnover and sections 8.33 through 8.40 regarding injunctions.
The debtor may offer to assign his inherited interest in order to satisfy his debt. See Tex. Est. Code § 122.201. The creditor should use extreme caution in deciding whether to accept any such assignment. For instance, the will may contain a “spendthrift clause” that prohibits the assignment of an inheritance expectancy or the debtor may have previously disclaimed his interest in the estate. This would present a problem to the creditor who releases the debtor from his liability only to discover that the assignment is invalid and there is no other means of recovery, although the creditor may seek to vitiate the transaction based on absence of consideration, mutual mistake, or otherwise.
§ 29.81:2Disclaimer of Interest in Estate by Beneficiary
A beneficiary under a will, including the guardian of an incapacitated beneficiary, an heir at law, or anyone who would receive property from a decedent through other means such as right of survivorship or contract, has an absolute right to disclaim any portion of the property received through intestate succession or by will. Tex. Est. Code § 122.002; Tex. Prop. Code ch. 240. The 2015 Texas legislature removed disclaimers from the Estates Code and added a new chapter 240 to the Property Code. Acts 2015, 84th Leg., R.S., ch. 562, § 3, 15 (H.B. 2428), eff. Sept. 1, 2015. Under these rules, a person intending to disclaim an interest under a will or intestate succession must deliver the disclaimer to the personal representative of the decedent’s estate; however, if no personal representative is then serving, the person may file the disclaimer in the official public records of the county in which the decedent was domiciled at his death or in which he owned real property. Tex. Prop. Code § 240.102. The effect of the disclaimer is to divest the beneficiary or heir of any liability to creditors of the estate. Tex. Prop. Code § 240.051.
§ 29.82Effect of Death on Litigation
When a party to a suit dies, entry of a suggestion of death into the court record permits the suit to proceed. Tex. R. Civ. P. 151, 152. If there are surviving defendants and no action is taken regarding the deceased defendant, the suit can proceed against the survivors, but any judgment will have no effect on the estate of the decedent and will bar any subsequent proceeding against the estate or the decedent’s heirs. Tex. R. Civ. P. 155; First National Bank v. Hawn, 392 S.W.2d 377 (Tex. Civ. App.—Dallas 1965, writ ref’d n.r.e.).
To bring the heirs or personal representative of a deceased debtor into litigation already filed, the attorney should file a suggestion of death and request the clerk to issue a scire facias against the heirs or personal representative requiring him or them to appear. If the debtor’s family has not instituted probate, the attorney should consider having a scire facias issued against the surviving spouse and any other known heirs; taking this action will either encourage the family to open probate or identify the decedent’s heirs. See form 29-10 in this chapter for a suggestion of death and scire facias.
§ 29.82:2Tolling of Limitations by Defendant’s Death
The death of a person against whom there may be a cause of action suspends the running of the applicable statute of limitation for either twelve months from death or until an executor or administrator is appointed, whichever comes first. Tex. Civ. Prac. & Rem. Code § 16.062.
In a dependent administration, limitations are also tolled on the date a claim is filed or deposited with the clerk. Tex. Est. Code § 355.008. In an independent administration, limitations are tolled only by the executor’s written approval of the claim, the filing of a pleading in a suit already pending at the time of the debtor’s death, or the filing of a suit against the executor regarding the claim. Tex. Est. Code § 403.057.
If suit is brought against a personal representative, a successor personal representative cannot claim a limitations defense if he knows of the suit against the prior representative. Rooke v. Jenson, 838 S.W.2d 229 (Tex. 1992).
§ 29.83Death or Incapacity of Creditor
If a creditor dies, the claims owned by the creditor may still be pursued. The personal representative of an estate may recover all property belonging to the estate, including all claims and debts due. Tex. Est. Code §§ 351.151, 351.054. To recover on the claim, a person interested in the creditor’s estate should open administration, and the administrator or executor should file the claim. If the claim is in litigation, the petition on the claim should be amended to substitute the personal representative in place of the creditor. See Tex. R. Civ. P. 63. Similarly, if the creditor becomes incapacitated, the guardian of the creditor’s estate may pursue the claim or continue the suit on the claim on the creditor’s behalf. Tex. Est. Code §§ 1151.104–.105.
If the decedent owned a farm, ranch, factory, or other business, the court may grant the personal representative the powers to operate the business that the court determines are appropriate if the disposition of the business was not specifically directed by the decedent’s will, it is not necessary to sell the business for the payment of debts or other lawful purposes, and the operation of the business by the personal representative is in the best interest of the estate. Tex. Est. Code §§ 351.201–.202(a). In deciding which powers to grant the personal representative, the court will consider the condition of the estate and the business, the necessity that may exist for the future sale of the business or its assets to pay debts or claims against the estate, the effect on the speedy settlement of the estate, and the best interests of the estate. Tex. Est. Code § 351.202(b).
If the decedent was a partner in a general partnership and the articles of partnership provide that the personal representative will be entitled to the deceased partner’s place, the representative may assume that position, liable only to the extent of the deceased partner’s share in the partnership and the estate’s assets held by the representative. Tex. Est. Code § 351.104.