Estate Debts and Claim Limitations

Sample medical bill

As part of taking inventory, an estate executor must look for and validate the debts of the decedent's estate.

Notice of Death Publication

If the estate is going through probate, the executor must typically publish a notice of death (see Sample Estate: Task tab) in the local newspaper where the decedent lived. The purpose of this notice is designed to inform potential creditors of the death, and while details vary from state to state, creditors typically have 3 to 9 months to contact the estate about any debt claims. If a potential creditor misses the claims deadline (see Sample Estate: Task tab) then the estate would not typically have a legal obligation to pay the debt (debts to the federal government are one exception to this rule).

Even if the estate is small enough to avoid probate, the executor may still wish to publish a notice of death, to protect the estate from future debt claims, which could be quite problematic if the estate assets have already been distributed.

TX Specifics

In Texas, the executor must publish a general notice to creditors in a newspaper of general circulation in the county, announcing the executor appointment, and that creditors should submit any claims within the period prescribed by law. This notice must be published within 1 month of executor appointment.

Within 2 months of appointment, the executor must also directly notify to all known secured creditors and secured creditors whose identities would be known through reasonable diligence (a secured creditor is someone whose debt is secured by property, for example, someone holding a mortgage). This notification must be delivered by certified or registered mail, return receipt requested, and should announce the appointment of the executor.

The executor is personally liable for failure to make any required notices.

The executor may also directly notify unsecured creditors (such as credit card companies), setting their deadline for response to 120 days after receipt of notice.

See Texas Estates Code § 308.051 - 056.

Informal Debt Claims

There are certain debts you will quickly discover as you go through the decedent's mail, or are contacted by creditors, such as insurance premiums, credit card balances, utility bills, and so forth.

You don't necessarily have to pay these debts unless the associated creditor makes a formal claim against the estate, potentially in response to the notice of death, but most executors will opt to do so in an attempt to "do the right thing". Moreover, failing to pay some of these ongoing bills may result in unwarranted harm to the estate (such as foreclosure or frozen pipes bursting): see Resolving Debts: Ongoing Bills.

In any case, these bills will likely continue to arrive over time, so it will likely be several months before you have a complete picture of all debts.

Statute of Limitations and Claims Deadlines

All states impose statutes of limitations on debts, meaning that after a certain amount of time passes from a debt's due date, the courts can no longer require the creditor to repay the debt. Typically, these time limits range from 3 years for open accounts (such as credit cards) to 10 years for contract debts.

When someone dies, these statutory limitations are often both extended and shortened. They can be extended in that the expiration period is often put on hold for a few months, so that everyone has a chance to get organized and sort things out. This "hold" is officially called "tolling" the debt, but is not usually a major factor since statutory limits are measured in years.

However, statutory limits are also shortened in that almost all states have mechanisms for the estate to establish a time limit for claim submissions measured in months, not years, and these shortened limits overrule any statute of limitations (in other words, even if a statute of limitations implies that a debt would still be enforceable, it will not be enforceable if the estate limits have kicked in). The section above on Notice of Death Publications explains how the estate can limit the exposure to debts.

TX Specifics

In Texas, creditors can submit claims against the estate until the estate is closed (see Texas Estates Code § 355.001). However, if an unsecured creditor received a copy of the notice from the executor, then that creditor has 120 days from receipt of notice to make a claim (see Texas Estates Code § 308.054).

Within these rules, Texas maintains a 4-year statute of limitations on general debts, from original due date or most recent payment, whichever is later (see Texas Civil Practice and Remedies Code Title2b § 16.004, and Texas Civil Practice and Remedies Code Title2b § 16.004).

See also Taking Inventory and Resolving Debts.

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