Creditor's Claims to Will

Question 1

Creditor’s Claims: General statute of limitations for unsecured creditors

Answer 1

unless personal permissive notice procedure is followed or authenticated claim rejection, the statute of limitations for unsecured creditors is the same for that as the underlying claims

Question 2

Creditor’s Claims: Notice Requirements for Unsecured Creditors (same for dependent and independent administrator)

Answer 2

Notice by publication: personal representative must publish notice in county newspaper within a month after being appointed

Permissive personal notice: to expedite claim, if personal notice for claims of money are given to UC, UC must bring forward any claims within 120 days or they will be barred if the notice states that.

Question 3

Creditor’s Claims: Process for Unsecured claims- dependent administration

Answer 3

• unsecured creditor must file authenticated claim supported by affidavit (only applies to claims for money; does not apply to unliquidated or contingent claims; e.g. tort actions)
• administrator must then accept or reject claim within 30 days (failure to do so constitutes acceptance)
• if claim is accepted: paid
• if claim is rejected: creditor must file suit on the claim within 90 days after rejection or SOL runs out.

Question 4

Creditor’s Claims: Process for Unsecured claims- independent administration

Answer 4

• must give notice by publication and may give personal notice (120 day SOL)
• presentment of claim does not have to be in a specific form (like it does for a dependent administration, unsecured creditor)
• if presented claim is rejected, there is no 90-day SOL

Question 5

Creditor’s Claims: Can the decedent’s estate be sued?

Answer 5

No. Action must be filed against the personal representative.

SOL does not toll if you sue estate when you should’ve sued personal representative.

Question 6

Creditor’s Claims: Personal Notice to Secured Creditors (same for dependent and independent administrator)

Answer 6

Within two months after being appointed, personal representatives must give personal notice.

Question 7

Creditor’s Claims: Secured Creditor’s Presentment for Payment as Matured Secured Claim

Answer 7

e.g. decedent has mortgage when he dies and is in the middle of the term. Creditor wants the payment of the whole mortgage amount out of the decedent’s estate.

Secured creditor can present its claim for payment as a matured secured claim (i) within six months after appointment of personal representative or (ii) within four months after personal notice is received (whichever is later)

Question 8

Creditor’s Claims: Matured Secured Claim’s effect on sale of property

Answer 8

if encumbered property is sold to raise needed money, secured creditor who files a matured secured claim has class 3 claim.

If sale proceeds are not sufficient to satisfy matured secured claim, creditor gets deficiency judgment and may collect the deficiency as a class 8 claim.

Question 9

Creditor’s Claims: Preferred Debt and Lien

Answer 9

debt paid according to terms of the note that cannot be taken out of the decedent’s personal estate

BUT

can foreclose on the property if beneficiaries cannot later pay off debt or beneficiaries can choose to sell the property to cover the debt

If either of these happen, preferred debt and lien cannot take losses out of beneficiary’s estate.

Question 10

Creditor’s Claims: Preferred Debt and Lien Priority

Answer 10

If decedent’s estate is insolvent, the preferred debt and lien (whether elected or relegated) has priority over the collateral over ALL other claims.

Question 11

Creditor’s Claims: Secured Creditor’s FAILURE to Present Payment as Matured Secured Claim

Answer 11

if time limit is not met to present payment as matured secured claim, it is classified as a preferred debt and lien

Meaning: creditor can foreclose, but cannot get a deficiency judgment (can only look to security interests in collection of debt)

Question 12

Creditor’s Rights: Source of Payment of Matured Secured Claim

Answer 12

exoneration of liens doctrine must be taken into account

If will executed prior to September 2005, source of payment is residuary estate (bc exoneration of liens)

If will executed after September 2005, source of payment is the beneficiary(s) of the encumbered property (bc no exoneration of liens)

Question 13

Creditor’s Rights: Claim Order of Priority

Answer 13

[secured creditor with preferred debt and lien has priority over all with respect to the foreclosure sale proceeds]

Class 1: Funeral expenses up to 15k and expenses of illness up to 15k, THEN family allowance

Class 2: expenses of administration

Class 3: secured claims, to extent covered by lien (if creditor filed matured secured claim)

Class 4: child support

Class 5: state taxes

Class 6: claims for repayment of medical assistance by state

Class 7: cost of confinement if decedent imprisoned in TX prison

Class 8: all other claims

Question 14

Creditor’s Rights: Foreclosure and Court’s Approval

Answer 14

Dependent administration, creditor cannot foreclose on the mortgage without court approval

Independent administration:

• creditor for matured secured claim cannot foreclose on mortgage without executor or court approval
• creditor (who elects or is relegated to) to preferred debt and lien cannot foreclose within first six months of administration

Question 15

Creditor’s Rights: Procedural steps for sale of real property in a dependent administration

Answer 15

1. Personal representative files application for sale describing property, amount of creditor’s claims, property on hand available to pay claims, other facts showing need to sell real estate
2. date for hearing set and notice given
3. hearing held and court specifies terms of sale
4. property is sold
5. court affirms sale in new hearing
6. personal representative gives deed to purchaser

Question 16

HEF: Meaning

Answer 16

Homestead, exempt personal property, and family allowance.

Set aside during probate.

Question 17

HEF: Urban homestead

Answer 17

lot/contiguous lots no larger than 10 acres used as residence or business

Question 18

HEF: Rural Homestead

Answer 18

200 acres (need not be contiguous) used as residence (not business)

(if single person, only can be 100 acres)

Question 19

HEF: Consequences of qualifying as homestead

Answer 19

(i) Both spouses must join in conveyance or mortgage of homestead property (even if it is separate property of one spouse)
(ii) Free from creditor’s claims during lifetime, except for:
- *purchase money mortgage lien
- *taxes
- mechanic’s liens for improvement on the homestead
- *equity loan (second mortgage loan) for up to 80 percent of the value of equity (FMV of property - balance on first mortgage)
(iii) on owner’s death, passes free of creditor’s claims (other than listed above) if owner survived by spouse or a minor child (even if homestead is conveyed to someone else instead)
(iv) *Probate homestead: right to occupy homestead (even if homestead was decedent’s separate property) rent-free for life for spouse (or up to 18 years of age for minor), or for so long as he occupies it as a homestead. Homestead cannot be partitioned until the right of occupancy ends
(v) exemption from real property ad valorem taxes

Question 20

Allowance in Lieu of Homestead or Exempt Property

Answer 20

If decedent did not own all of the property that his surviving spouse or minor children (or incapacitated adult child) are entitled to have set apart for them, probate judge may award an allowance in lieu of such property.

Allowance in lieu of homestead (if decedent did not own homestead): up to $45k total

Allowance in lieu of exempt property (available to extent any items on the exempt personal property list are not in the estate at death): up to 30k total

Question 21

Family Allowance

Answer 21

Purpose: to provide support for surviving spouse and children and incapacitated adult children whom decedent had to support

Entitled to an allowance for one year of support and maintenance.

Size of community estate and spouse’s not taken into account, but size of surviving spouse’s separate property can be.

Question 22

Compensation of Executors and Administrators

Answer 22

5% in and 5% out rule

A personal rep is entitled to commission of 5% of all sums actually received or paid out in cash

Does not apply to cash on hand or the collection of life insurance proceeds

Does not apply to distributions to the beneficiaries or heirs