How to Sell a Promissory Note After a Death in Texas

When a loved one passes away and you discover that their estate includes a promissory note, you are suddenly responsible for an unfamiliar financial asset that requires decisions you may not feel equipped to make. The note needs to be managed — payments tracked, records maintained, insurance verified — while you are simultaneously grieving, settling the estate, and handling a dozen other responsibilities that demand your attention. For most people in this situation, selling the note for cash is the most practical and least stressful path forward.

Selling a promissory note after a death in Texas follows the same general process as any note sale, but with additional legal steps required to establish the authority to act on behalf of the estate. These steps are straightforward when you know what to expect, but they can be confusing and anxiety-inducing when you are encountering them for the first time during an already difficult period.

This guide walks you through the complete process of selling a promissory note after a death in Texas. From establishing your legal authority to closing the sale and distributing the proceeds, each step is explained clearly so you can move through the process with confidence and resolve this aspect of the estate efficiently.

Step 1: Locate and Secure the Note Documents

Before anything else, you need to find the documents that define and evidence the note. Without these documents, you cannot effectively evaluate the note, present it to buyers, or close a sale.

What You Are Looking For

The essential documents are the original signed promissory note, which is the borrower's written promise to pay, and the recorded deed of trust, which secures the note against the property. You should also look for the payment history or ledger showing payments received, the title insurance policy from the original transaction, proof of hazard insurance on the property, any correspondence with the borrower, and any modifications or amendments to the original terms.

Where to Look

Start with the deceased's personal files — a home office, filing cabinet, desk, or safe. Check any safe deposit boxes. Contact the attorney who handled the original transaction or the estate planning attorney who prepared the deceased's will or trust — they may have copies of key documents. Check with any title company involved in the original sale.

If you cannot find the original promissory note, the recorded deed of trust can be obtained from the county clerk's office where the property is located. A lost note affidavit may be needed to establish the estate's rights as the note holder. Missing documents complicate the process but do not make the note unsellable. For a complete documentation guide, see this resource on documents needed to sell a note in Texas.

Step 2: Establish Your Legal Authority

You cannot sell a note that belongs to the estate unless you have the legal authority to act on the estate's behalf. The path to that authority depends on how the deceased held the note and their estate planning structure.

If the Note Was in a Living Trust

If the deceased placed the note in a revocable living trust, the successor trustee named in the trust document has authority to manage and sell the note without probate. The successor trustee simply presents a copy of the trust document and the death certificate to establish their authority. This is the fastest and simplest path — you can begin the sale process immediately.

If the Note Was in the Deceased's Individual Name

If the note was held in the deceased's individual name, probate is typically required to establish the legal authority to sell. In Texas, the probate process involves filing the will with the appropriate county court, having the court admit the will to probate, and having the court appoint the executor named in the will or, if there is no will, an administrator.

Once appointed, the executor or administrator receives letters testamentary or letters of administration, which is the legal document authorizing them to act on behalf of the estate. This process can take several weeks to a few months depending on the county and the complexity of the estate.

Small Estate Options

Texas offers simplified probate procedures for smaller estates that may allow you to establish authority more quickly. A small estate affidavit may be available if the estate meets certain criteria, or a muniment of title proceeding may be appropriate in some circumstances. Consult with a Texas probate attorney to determine the fastest available path for your specific situation.

If Multiple Heirs Are Involved

If the note is being inherited by multiple heirs, all heirs typically need to agree to the sale or the executor must have the authority under the will to sell estate assets and distribute the proceeds. Disagreements among heirs about whether to sell can delay the process, so early communication and consensus-building among family members is important.

Step 3: Notify the Borrower

As soon as you have located the note documents and established or begun establishing your legal authority, notify the borrower of the note holder's death. This is important for several practical reasons.

The borrower needs to know who to contact regarding the note and where to direct payments. Without notification, the borrower may continue sending payments to an address or account that is no longer monitored, creating confusion about the payment status. Some borrowers stop paying when they learn the note holder has died, either because they are uncertain about who to pay or because they hope the obligation will be overlooked in the estate settlement.

Send a written notice to the borrower identifying yourself, your role in relation to the estate, and providing updated payment instructions. Keep the tone professional and reassuring — let the borrower know that their loan terms remain unchanged and that the only change is who is managing the note. If the borrower has questions or concerns, address them promptly to maintain the payment relationship.

Step 4: Assess the Note's Current Status

Before approaching buyers, assess the current condition of the note to understand what you are working with.

Payment Status

Review the payment history and determine whether the borrower is currently paying on time, has fallen behind since the death, or was already delinquent before the death. A note that is current and performing is worth significantly more than one where the borrower has stopped paying. If the borrower has fallen behind since the death, a prompt notification and payment demand may get things back on track before you begin the sale process.

Property Condition and Value

Get an estimate of the property's current market value. This does not require a formal appraisal — a quick check of comparable sales online, a conversation with a local real estate agent, or a drive-by assessment can give you a reasonable estimate. The property value relative to the note balance determines the LTV ratio, which is one of the most important factors in the note's market value.

Insurance and Taxes

Verify that hazard insurance is active on the property and that property taxes are current. If insurance has lapsed since the death, contact the borrower and require them to reinstate coverage. If property taxes are delinquent, this needs to be addressed because tax liens take priority over the deed of trust. For more on how these factors affect pricing, see this guide on what determines note value in Texas.

Step 5: Get a Cash Offer From a Note Buyer

With your documents assembled, your authority established, and your assessment complete, contact a note buyer to get a cash offer. This is the step where the process begins to feel productive — you get a concrete number that tells you what the note is worth on the open market.

What to Provide the Buyer

Share the note details including the remaining balance, interest rate, monthly payment, remaining term, and payment history. Provide copies of the promissory note and deed of trust. Let the buyer know the note is being sold as part of an estate settlement and share any information about the property's current value and condition.

What to Expect

An experienced buyer like Longhorn Note Buyers can provide a preliminary cash offer within 24 hours. The offer is based on the note's characteristics and represents what the buyer is willing to pay for the right to collect the remaining payments. Use this offer to evaluate your options and, if there are multiple heirs, to facilitate a discussion about whether to sell.

Getting Multiple Offers

If time permits, getting offers from two or three buyers gives you a sense of the market and ensures you are receiving a fair price. However, in estate settlement situations where speed and simplicity are priorities, working with a single reputable buyer is often the most efficient approach. A buyer with an A+ BBB rating and a verified track record, like Longhorn Note Buyers, provides the confidence that the offer is fair and the process will be handled professionally.

Step 6: Navigate the Due Diligence Process

After accepting an offer, the buyer conducts due diligence — the same process that applies to any note sale, with a few additional considerations related to the estate context.

Estate-Specific Due Diligence

In addition to the standard title search, property valuation, and payment verification, the buyer will verify your legal authority to sell the note. They will want to see letters testamentary, letters of administration, the trust document with a death certificate, or whatever documentation establishes your right to act. Make sure these documents are readily available to avoid delays.

Timeline

Due diligence typically takes two to three weeks for standard notes. Estate-related sales may take slightly longer if there are additional documents to review or if the probate process is still in progress. However, many buyers will begin due diligence while you are finalizing your legal authority, running the processes in parallel to save time.

Your Role

Be responsive to document requests and questions. The buyer and their service providers may need information that you have to track down — payment records from the deceased's files, insurance documentation, or details about the property. Prompt responses keep the process moving and prevent unnecessary delays.

Step 7: Close the Sale and Distribute Proceeds

Once due diligence is complete, the closing process is straightforward.

Closing Documents

As the executor, administrator, or trustee, you sign the closing documents on behalf of the estate or trust. These include an endorsement of the promissory note to the buyer, an assignment of the deed of trust transferring the security interest, and a seller's affidavit or executor's deed confirming your authority and the accuracy of the information provided. The assignment is recorded with the county clerk, and the purchase price is wired to the estate's bank account.

Distributing the Proceeds

Once the funds are received, they become part of the estate and are distributed according to the will, trust, or intestacy laws. If the estate is still in the settlement process, the funds are held in the estate account until the executor or administrator is ready to make distributions. If the estate has already been settled except for the note, the proceeds can be distributed to the heirs promptly.

Borrower Notification

After closing, the buyer sends a notification to the borrower informing them of the change in ownership and providing new payment instructions. The borrower's terms remain unchanged. From the estate's perspective, the note is fully resolved.

Tax Considerations When Selling an Inherited Note

The tax treatment of selling an inherited note includes some provisions that work in the estate's favor.

Stepped-Up Basis Advantage

When a note is inherited, the tax basis is stepped up to the fair market value at the date of death. This means that if the fair market value at death was $85,000 and you sell the note for $82,000, you may have a capital loss rather than a gain — even though the original note holder would have had significant capital gains if they had sold during their lifetime. The stepped-up basis can substantially reduce or eliminate the tax cost of selling the inherited note.

Income Tax on Payments Received

Any note payments received by the estate between the date of death and the date of sale are taxable income. The interest portion is taxed as ordinary income, and the principal portion is a return of the stepped-up basis. Make sure these payments are properly accounted for in the estate's tax filings.

Consult a Tax Professional

The interaction of estate tax, income tax, stepped-up basis, and installment sale rules can be complex. Work with the estate's CPA or tax attorney to ensure the sale and the resulting tax reporting are handled correctly. For general context, see this overview of tax implications of selling a note in Texas.

Common Challenges and How to Handle Them

Estate-related note sales frequently encounter specific challenges. Here is how to address the most common ones.

The Borrower Stops Paying After the Death

This is unfortunately common. Some borrowers view the note holder's death as an opportunity to stop paying, either hoping the debt will be forgotten or testing whether anyone is monitoring the situation. Address this immediately by sending a formal demand letter and making clear that the note remains a valid obligation of the estate. If the borrower does not resume payments, you can still sell the note — defaulted notes are sellable, just at a deeper discount.

Missing Original Documents

If the original promissory note cannot be found, a lost note affidavit combined with the recorded deed of trust and payment records can establish the estate's rights. An attorney can prepare the affidavit, and most experienced note buyers are accustomed to working with lost note situations.

Disagreements Among Heirs

When multiple heirs inherit a note, disagreements about whether to sell are common. One heir may want cash now while another prefers ongoing income. The executor has a fiduciary duty to act in the best interest of the estate and all beneficiaries. In many cases, selling the note and distributing cash is the most equitable approach because it converts an indivisible asset into something that can be divided equally. If agreement cannot be reached, the executor may need court guidance.

Probate Delays

The probate process in Texas can take several weeks to several months, and the note cannot be sold until the executor or administrator has formal authority. During this period, make sure the borrower continues making payments, that insurance and taxes remain current, and that the documents are organized for a quick sale once authority is established. Some buyers will begin preliminary due diligence before probate is complete, positioning the transaction for a fast close once the legal authority is in place.

Why Longhorn Note Buyers for Estate Note Sales

Longhorn Note Buyers has extensive experience working with executors, trustees, and heirs on estate-related note sales across Texas. They understand the emotional context, the legal requirements, and the practical challenges that make these transactions different from a standard note sale. With over $47 million in notes purchased, an A+ BBB rating, and a 100 percent close rate, they provide the professionalism and reliability that families need during a difficult time.

Their 24-hour offer turnaround gives executors a concrete number for estate planning and heir discussions. Their willingness to work around probate timelines and coordinate with estate attorneys demonstrates a level of flexibility that less experienced buyers may not offer. And their commitment to fair, transparent pricing ensures that the estate receives a proper market value for the note.

Ready to Sell Your Note?

If you are managing an estate that includes a promissory note in Texas, the first step toward resolution is understanding what the note is worth. Contact Longhorn Note Buyers today at (210) 828-3573 or visit longhornnotebuyers.com to get your free, no-obligation cash offer within 24 hours. Whether you are the executor, the trustee, or an heir, the Longhorn team will guide you through the process with patience, professionalism, and respect for the situation.

Frequently Asked Questions

How long after a death can I sell a promissory note?

You can sell the note as soon as you have the legal authority to do so. If the note is in a living trust, the successor trustee can act immediately with the trust document and death certificate. If probate is required, you must wait until the court appoints the executor or administrator, which typically takes several weeks to a few months in Texas. Some buyers will begin preliminary evaluation during the probate period so the sale can close quickly once authority is established.

Does selling an inherited note trigger estate tax?

The note is included in the gross estate at its fair market value for estate tax purposes regardless of whether it is sold. Selling the note does not create an additional estate tax liability — the value was already counted. The sale may trigger income tax on any gain above the stepped-up basis, but because the basis is stepped up to fair market value at death, the gain on an immediate sale is typically minimal or zero.

What if the deceased was collecting payments informally with no records?

Reconstructing the payment history is important but not always easy. Check the deceased's bank statements for regular deposits that match the expected payment amounts. Contact the borrower and ask them to provide their own records of payments made. If a complete history cannot be reconstructed, disclose the gaps to the buyer — they will factor the incomplete records into their evaluation but can still make an offer based on the available information.

Can the executor sell the note without all heirs' consent?

In most cases, yes. The executor has a fiduciary duty to manage estate assets in the best interest of all beneficiaries, and selling a note to generate liquid assets for distribution is generally within the executor's authority under the will. If the will grants the executor broad powers over estate assets, heir consent is typically not required. If the will is silent or restrictive, or if heirs object, the executor may need court approval. Consult with the estate's attorney for guidance on your specific situation.

What if the note was created informally without proper legal documents?

Informally created notes — those without proper legal documentation, unrecorded deeds of trust, or missing elements — can still be sold, but they may require additional work to establish the estate's rights and to satisfy a buyer's due diligence requirements. An attorney can help identify the gaps and determine what remediation is needed. Some issues can be resolved relatively quickly, while others may require court action or borrower cooperation. An experienced buyer like Longhorn Note Buyers can advise on what is needed to make the note saleable.