When a loved one passes away, their finances don’t just disappear. Credit card bills, medical expenses, and even tax obligations may still need to be addressed. That’s where probate comes in—not just to distribute what’s left behind, but to make sure everything is resolved correctly.
If you’re unsure how debts and taxes are handled during this process, you’re not alone. Many families in Dallas-Fort Worth face the same questions. At The Law Office of Carey Thompson, PC, we’re here to guide you step by step, helping you understand your responsibilities and protect your loved one’s estate. Contact us today to consult with an experienced probate attorney.
What Happens to Debts After Death?
The notion that debts die with a person is not entirely accurate. Instead, those obligations shift to the person’s estate. That means creditors may have a legal right to be repaid before any assets are passed on to beneficiaries.
Common debts that surface in probate include:
- Medical bills
- Credit card balances
- Mortgages or home equity loans
- Car loans
- Personal loans
The estate—not the surviving family members—is responsible for paying these bills. Unless you co-signed a loan or are otherwise legally tied to the debt, you generally won’t be personally responsible for covering it.
Creditors and the Probate Process in Texas
During probate, the person in charge of the estate (called an executor or administrator) must notify known creditors and give them a chance to file claims. Texas law also establishes deadlines and procedures for handling those claims, including the order in which debts are paid.
Some debts take priority over others. Here’s how it typically works:
- Court and legal costs related to probate
- Reimbursement for funeral expenses
- Secured debts like mortgages and car loans
- Taxes and government debts
- Unsecured debts like credit cards or medical bills
If there isn’t enough money in the estate to cover everything, Texas law provides a system for handling such situations as well. Creditors may receive partial payment or none at all, depending on the available funds.
What About Estate Taxes?
Here’s some good news: Texas does not have a state estate tax or inheritance tax. That means most families don’t have to worry about estate taxes reducing what their loved one left behind.
However, the federal estate tax may still apply to vast estates. For 2025, the exemption is $13.99 million per person and $27.98 million for a married couple filing jointly. That means only estates that exceed those thresholds are subject to the federal estate tax. Starting in 2026, new federal rules will raise the exemption to $15 million per person, or $30 million for couples, with future adjustments tied to inflation.
While the vast majority of estates in our area won’t be taxed at the federal level, we still take a careful look at each situation. If there’s a chance the estate might come close to those limits, we’ll make sure everything is handled appropriately.
Income Taxes and Other Filings
Taxes don’t stop when someone passes away. The executor is responsible for filing the deceased person’s final income tax return. This covers any income earned in the year of their death.
Depending on the situation, the estate itself may also need to file its return if it continues to earn income during the probate process. That might include things like:
- Rental income from property
- Interest or dividends from investments
- Business revenue
The estate may need to file IRS Form 1041 to report that income. We work closely with our clients to determine what’s required and ensure that deadlines are met. Executors can sometimes be held personally liable for tax issues, so we make sure you’re not caught off guard.
Can Creditors Touch Inherited Assets?
Some assets are subject to probate, while others are not. Only assets that pass through probate are typically subject to creditor claims.
Here’s a general breakdown:
- Probate assets (like property held solely in the deceased person’s name) can be used to pay debts.
Non-probate assets (like life insurance policies, retirement accounts with named beneficiaries, or jointly owned property) are often protected from creditors.
In Texas, surviving spouses may also benefit from homestead protections, which can shield the family home from being sold to pay certain debts. This can be a huge relief during an already difficult time.
How We Help You Settle Debts During Probate
Every estate is different. Some are relatively simple, others involve unexpected bills, aggressive creditors, or tax questions that are hard to answer without guidance.
At our firm, we help you:
- Understand what debts need to be paid and in what order
- Notify creditors and respond to claims properly
- Avoid overpaying or paying debts that aren’t legally valid
- File required tax returns and avoid IRS penalties
- Protect the rights of surviving spouses and beneficiaries
We know this process can be overwhelming, especially if you’re grieving. We’ll handle the legal and administrative side so you can focus on your family.
Talk to a Fort Worth Probate Attorney Today
Probate doesn’t just involve paperwork—it involves real families trying to do the right thing under challenging circumstances. Whether you’re facing questions about debt, taxes, or how to protect inherited assets, we’re here to help.
Contact the Law Office of Carey Thompson, PC today to speak with an experienced probate attorney who understands the needs of Texas families. Let’s work together to protect what matters most.