Estate Administration

Creditor’s Claims

Claim of Beneficiary’s Creditor

Gorham v. Gates ex. rel. Estate of Badouh, 82 S.W.3d 359 (Tex. App.—Austin 2002, pet. denied).


Testatrix devised real property to Beneficiary. Creditors of Beneficiary planned to recover their claims from this property. Beneficiary then attempted to disclaim her interest in this property but the disclaimer was invalid. Under court order, the real property was sold free and clear of all claims and the proceeds were placed in the registry of the court subject to Creditors’ claims. Creditors appealed asserting that the proceeds should have been immediately disbursed to them.

The appellate court affirmed. The court explained that prior court proceedings dealt only with the validity of Beneficiary’s disclaimer. These proceedings did not resolve the validity of Creditors’ claims. The court order authorizing the sale merely stated that the property needed to be sold to satisfy claims and administrative expenses, not just Creditors’ claims. The court order did not prioritize the claims. Accordingly, it was appropriate for the probate court to require the proceeds to be placed in the registry of the court until the validity and priority of Creditors’ claims could be determined. The court also indicated that Creditors’ reliance on Probate Code § 338 was misplaced because that section deals with claims against the decedent, not claims against a beneficiary.

Moral: A creditor of a beneficiary should not expect the administration of an estate of the beneficiary’s benefactor to resolve all of the creditor’s concerns.