Payment of Debts Clause

A Payment of Debts Clause is a provision commonly included in a person’s will or estate plan that specifies how debts and obligations of the deceased should be handled upon their death.

This clause typically outlines that the executor of the estate is responsible for settling any outstanding debts before any assets are distributed to the beneficiaries. It serves to ensure that creditors are paid from the estate’s assets, thereby protecting the beneficiaries from inheriting liabilities or being pursued for the deceased’s debts.

For example, if an individual dies with outstanding credit card debt, the Payment of Debts Clause would direct the executor to use the estate’s funds to pay off that debt before distributing the remaining assets to heirs.

In Texas, including a Payment of Debts Clause in your estate planning documents can help streamline the probate process, providing clear instructions for the executor and potentially preventing disputes among beneficiaries regarding the payment of debts and liabilities. This clause is particularly important in larger estates where the debts might exceed the value of the assets, as it helps clarify the order of asset distribution and the responsibilities of the executor.