When an estate has enough to pay everyone, the order of payment rarely matters. When it does not, the order is everything. Texas law ranks claims into classes and pays them from the top down, so knowing where a debt falls tells you whether it gets paid at all.
The Classes of Claims
- Class 1 — funeral expenses (up to $15,000) and last-illness expenses (up to $15,000); any excess drops to unsecured
- Class 2 — expenses of administration and of preserving and managing the estate
- Class 3 — secured claims, paid from the secured property
- Class 4 — child support arrearages
- Class 5 — state taxes, penalties, and interest
- Class 6 — cost of confinement owed to the state prison system
- Class 7 — repayment of Medicaid benefits paid by the state
- Class 8 — all other claims
Family Comes Before Most Creditors
Before general creditors are paid, the surviving family’s exempt property set-aside and family allowance are protected. In fact, when a representative has funds in hand, Texas directs payment first to funeral and last-illness costs, then to the family allowance, then to administration expenses, and only then to the remaining classes of claims.
Why the Order Matters
An estate that cannot pay every debt is insolvent. In that situation, paying a lower-priority creditor ahead of a higher one can make the executor personally liable. That is why matching each debt to its class — and paying strictly in order — is one of the most important things a representative does. Secured debts follow their own special rules.
Frequently Asked Questions
What debts get paid first in a Texas estate?
Funeral expenses and last-illness expenses come first, up to $15,000 each, along with the family allowance, followed by administration expenses and then the remaining classes of claims.
What if an estate cannot pay all its debts?
Claims are paid in the order of their statutory class. Higher-priority claims are paid in full first, and lower classes may go partly or entirely unpaid.
Where does Medicaid estate recovery fall in the order?
Repayment of state medical-assistance benefits is a low-priority class, paid only after most other claims, including taxes, have been satisfied.
Talk With a Texas Probate Attorney
Dealing with an estate that may not cover its debts? We can help you pay them in the right order. Call 713-955-6182 or contact The De Leon Law Firm to get started.