Creditor's Claims to Will Flashcards
Creditor’s Claims: General statute of limitations for unsecured creditors
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
Creditor’s Claims: Notice Requirements for Unsecured Creditors (same for dependent and independent administrator)
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.
Creditor’s Claims: Process for Unsecured claims- dependent administration
- 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.
Creditor’s Claims: Process for Unsecured claims- independent administration
- 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
Creditor’s Claims: Can the decedent’s estate be sued?
No. Action must be filed against the personal representative.
SOL does not toll if you sue estate when you should’ve sued personal representative.
Creditor’s Claims: Personal Notice to Secured Creditors (same for dependent and independent administrator)
Within two months after being appointed, personal representatives must give personal notice.
Creditor’s Claims: Secured Creditor’s Presentment for Payment as Matured Secured Claim
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)
Creditor’s Claims: Matured Secured Claim’s effect on sale of property
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.
Creditor’s Claims: Preferred Debt and Lien
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.
Creditor’s Claims: Preferred Debt and Lien Priority
If decedent’s estate is insolvent, the preferred debt and lien (whether elected or relegated) has priority over the collateral over ALL other claims.
Creditor’s Claims: Secured Creditor’s FAILURE to Present Payment as Matured Secured Claim
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)
Creditor’s Rights: Source of Payment of Matured Secured Claim
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)
Creditor’s Rights: Claim Order of Priority
[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
Creditor’s Rights: Foreclosure and Court’s Approval
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
Creditor’s Rights: Procedural steps for sale of real property in a dependent administration
- 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
- date for hearing set and notice given
- hearing held and court specifies terms of sale
- property is sold
- court affirms sale in new hearing
- personal representative gives deed to purchaser
HEF: Meaning
Homestead, exempt personal property, and family allowance.
Set aside during probate.
HEF: Urban homestead
lot/contiguous lots no larger than 10 acres used as residence or business
HEF: Rural Homestead
200 acres (need not be contiguous) used as residence (not business)
(if single person, only can be 100 acres)
HEF: Consequences of qualifying as homestead
(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
Allowance in Lieu of Homestead or Exempt Property
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
Family Allowance
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.
Compensation of Executors and Administrators
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
