If you represent creditors, a defendant in your lawsuit that has died, or your client already has judgments against a deceased person, here’s a brief overview of your client’s rights. First, a person’s death does not end claims against them. Second, collection rights may be better against the estate than the living debtor, as most exempt assets are not passed to heirs free of debts.
The debtor’s death does not terminate legal claims or debts, but simply shifts the claims to the estate; therefore, an estate must be opened. If an estate has not been opened, and it does not appear that the heirs are moving quickly to do so, a creditor can open an estate on their own initiative. After an administrator or executor is appointed for the estate, that person is substituted as the defendant in the ongoing lawsuit which then continues as before. A judgment received is collectible against the non-exempt assets of the estate.
If your client already has a judgment, again an estate has to be opened (either by the heirs or the creditor) and then a claim filed against the estate. In dependent administrations, claim procedures are technical and require the services of a probate attorney. In independent administrations, claim procedures are less technical, but if payment is not forthcoming, a collection lawsuit against the executor/administrator may need to be pursued.
As Texas is a debtor-friendly estate, many judgments remain unpaid when a person dies, but the decedent’s exempt property does not pass to their heirs as exempt property in most cases. A homestead will continue to be exempt only if a spouse survives. Although the homestead is an asset of the estate that can pass to the heirs, it does not pass free of creditors. It is no longer exempt property.
Other personal exemptions (vehicles, other personal property, retirement accounts) are not passed on to descendants as exempt property. Therefore, instead of being bad news for the creditor, the debtor’s death may open up avenues for collection that never existed before.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
