How Much Can I Spend on Funeral Expenses?
Most people who find themselves acting as personal representatives of loved ones' estates don't have any special training or experience to help them carry out their duties to the beneficiaries and creditors of the estates. Personal representatives often wonder how much they can spend on the funerals without getting into trouble with the creditors of the estate, especially when the deceased had more debt than assets. Here are a few considerations to keep in mind if you are in this situation.
In Texas, funeral expenses and expenses associated with the deceased's last illness get top priority. All “reasonable” funeral expenses may be paid from estate funds, regardless whether any money will be left over to pay other claims. Unfortunately, the law does not specifically define how much is reasonable in this context.
The Texas Probate Code does, however, provide a rule of thumb for reasonable funeral expenses. Under Texas law, the first $15,000 in funeral expenses and the expenses of a deceased's last illness must be paid before any other claims. Such expenses greater than $15,000 take a back seat to any allowances paid to the surviving spouse or children and the expenses of administration, but they are still payable before any other types of claims.
Another point to consider is whether the IRS is likely to consider the funeral expenses to be reasonable. This question only comes into play for large estates which may owe estate taxes. In calculating the net assets of an estate, the IRS allows a deduction for reasonable funeral expenses, among other possible deductions. Again, federal tax law does not define reasonable in the context of funeral expenses.
That being said, the IRS generally honors local judges' opinions as to the reasonableness of funeral expenses. If funeral expenses have been presented to a probate court without objection, or in particular if the probate judge approved the funeral expenses, the IRS is likely to adopt the same position.
For help carrying out the duties and responsibilities of a personal representative, administrator or executor of an estate in Texas, contact an experienced Bryan-College Station, Texas probate attorney. We have the knowledge, experience and insight to explain the law as it relates to your situation and recommend your next steps. Call Peterson Law Group today at 979-703-7014, or fill out our online contact form.