Fiduciaries play a key role in managing financial matters for estates and trusts. One of their most important responsibilities involves handling outstanding debts. If you’re named as a fiduciary, you might wonder whether you could be held personally responsible for those unpaid obligations.
Texas law provides specific rules that outline what fiduciaries must do.
Understanding fiduciary debt responsibilities
As a fiduciary in Texas, you’re legally required to act in the best interests of the estate or trust. This includes identifying, verifying, and paying valid debts using estate assets. You don’t use your personal funds. Instead, you pay creditors from the estate before distributing property to heirs or beneficiaries. Ignoring debts or delaying payment could violate your legal duties and expose you to personal liability.
What happens if debts go unpaid?
If legitimate debts remain unpaid because of a fiduciary’s inaction or mismanagement, creditors may file a claim against the estate. If the fiduciary has distributed assets without settling debts, courts may hold them personally responsible. Texas courts treat this seriously. They can order the fiduciary to repay the estate or creditors directly. This includes situations where a fiduciary failed to notify creditors properly or failed to set aside enough funds for claims.
Common mistakes that create liability
Fiduciaries sometimes assume they can wait until the end of the process to handle debts. Others may misunderstand the requirement to publish notice to creditors or overlook smaller debts. These mistakes can lead to court-ordered repayment, removal as fiduciary, or personal liability for unpaid debts if you distribute assets before settling valid claims. Following proper procedures, like filing notice and observing claim periods, protects you from liability.
Avoiding personal financial consequences
You can avoid responsibility for unpaid debts by following Texas probate rules carefully. This includes notifying creditors, prioritizing secured claims, and keeping records of all payments. If you’re unsure whether a debt is valid, seek a ruling from the court before paying or rejecting the claim. Diligence and transparency protect you and the estate.