Hierarchy of Claims Against the Estate

A claim or any part of a claim for money against an estate may not be paid until the claim has been approved by the court or established by the judgment of a court of competent jurisdiction.

Texas Estates Code defines “Claims” as the following, “(1) liabilities of a decedent that survive the decedent’s death, including taxes, regardless of whether the liabilities arise in contract or tort or otherwise; (2) funeral expenses; (3) the expense of a tombstone; (4) expenses of administration; (5) estate and inheritance taxes; and (6) debts due such estates.”

As this definition shows, a claim is a debt that the decedent owed before, at, or which resulted after death. Despite the order of occurrence, financial obligations the estate is responsible for repaying are separated into eight (8) different classes. These classes govern and prioritizes the order in which charges against an estate are to be paid.

• Class 1 claims are composed of funeral expenses and expenses of the decedent’s last illness, including claims for reimbursement of those expenses, for a reasonable amount approved by the court, not to exceed $15,000 for funeral expenses and $15,000 for expenses of the decedent’s last illness. Any excess shall be classified and paid as other unsecured claims.

• Class 2 claims are composed of:
  • (1) expenses of administration;
  • (2) expenses incurred in preserving, safekeeping, and managing the estate, including fees and expenses awarded under Section 352.052;
  • (3) unpaid expenses of administration awarded in a guardianship of the decedent; and
  • (4) for an estate with respect to which a public probate administrator has taken any action under Chapter 455, court costs and commissions to which the administrator is entitled under Subchapter A, Chapter 352.

• Class 3 claims are composed of each secured claim for money under Section 355.151(a)(1), including a tax lien, to the extent the claim can be paid out of the proceeds of the property subject to the mortgage or other lien. If more than one mortgage, lien, or security interest exists on the same property, the claims shall be paid in order of priority of the mortgage, lien, or security interest securing the debt.

• Class 4 claims are composed of claims:
  • (1) for the principal amount of and accrued interest on delinquent child support and child support arrearages that have been:
    • (A) confirmed as a judgment or a determination of arrearages by a court under Title 5, Family Code; or
    • (B) administratively determined by the Title IV-D agency, as defined by Section 101.033, Family Code, in a Title IV-D case, as defined by Section 101.034, Family Code; and
  • (2) for unpaid child support obligations under Section 154.015, Family Code.

• Class 5 claims are composed of claims for taxes, penalties, and interest due under Title 2, Tax Code, Chapter 2153, Occupations Code, former Section 81.111, Natural Resources Code, the Municipal Sales and Use Tax Act (Chapter 321, Tax Code), Section 451.404, Transportation Code, or Subchapter I, Chapter 452, Transportation Code.

• Class 6 claims are composed of claims for the cost of confinement established by the Texas Department of Criminal Justice under Section 501.017, Government Code.

• Class 7 claims are composed of claims for repayment of medical assistance payments made by the state under Chapter 32, Human Resources Code, to or for the benefit of the decedent.

• Class 8 claims are composed of any other claims not described by Class 1 – Class 7 claims

It’s important to note that collection efforts cannot commence until a personal representative is appointed for the estate. Once appointed, a personal representative has the duty to research the legitimacy of such claims and pay, settle, or disallow claims against the estate. Sometimes the total value of estate assets will not be enough to pay back all of the claims, hence the necessity for a classification of claims to ensure that the administrator pays back the debts in the order of priority.