Life Care Planning Reed: What creditors’ claims can independent executors pay?

Sandra W. Reed
Sandra Reed

In 2009, Donald loaned his brother, Howard, $20,000 to pay make his house payments during the six months Howard was unemployed due to the 2008 financial crisis. In the following years, Howard’s wealth increased significantly, far surpassing Donald’s. However, Donald never collected the debt and Howard never offered repayment.

Howard died Dec. 31, 2020, leaving a substantial estate. Upon the insistence of his daughter, Inez, Donald submitted a claim to Howard Jr., as the independent executor of Howard’s estate for the $20,000. The independent executor denied the claim on the basis that the statute of limitations had run on the collection of the debt. Inez was incensed, certain her cousin could have paid the claim if he had wanted to. Was the executor right to deny the claim?

What creditors’ claims can an independent executor pay?

An independent executor must adhere to Texas Estates Code §403.0585 in determining what claims presented by creditors are to be paid from the estate. The text states that the independent executor may pay and not incur personal liability a claim for money from the estate at any time (1) if the claim is not barred by the statute of limitations and (2) the executor reasonably believes the estate has assets to pay all claims against the estate.

Howard Jr. easily determined that the estate had sufficient funds to pay all debts, including the $20,000 loaned to Donald. However, the debt was incurred in 2008. The statute of limitations on collection of an unsecured debt for money is four years. Therefore, Howard Jr. was right to deny the claim. Donald should have taken action to renew the obligation loan within each four-year period from the initial date of the loan to avoid limitations.

Can an independent executor voluntarily pay a barred claim from the estate?

The independent executor cannot voluntarily pay a barred claim. Doing so would result in the executor’s incurring personal liability if one of the beneficiaries of the estate complained.

Howard Jr. could safely repay Donald from the estate funds only if he obtained agreement from all the beneficiaries of the estate to do so.

Sandra W. Reed practices Elder Law in Somervell County, handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning.  She lives on beautiful Chalk Mountain and can be reached at 254.797.0211; 817.946.2809 or at sreed@kbzlaw.com.