Estate Assets and Debts: Confusion About Money Received from Estate

My question involves estate proceedings in the state of: Texas

This is a real doozy of a situation involving the distribution of funds from an estate and whether it was done correctly. I have a feeling it was horribly screwed up and that my wife might be on the hook for a large amount of money, or worse.

First, a quick summary of the players and events in question (names changed, obv.):

• My father-in-law, Bob, had two kids by his first marriage: my wife and her older brother Brian.
• He then married his second wife, Pam.
• Pam had a son from her first marriage: Paul.
• Pam died a few years back, leaving everything that was hers individually to Paul.
• Bob passed a year or so after that, without a will and without having paid his taxes in at least a couple of years.
• According to the law as explained to Brian and my wife, once all debts/taxes were paid, Paul was to get 50% of the remaining estate (i.e. Pam's half of her and Bob's joint assets) and my wife and Brian were to split the other 50% (i.e. Bob's half).

This is where the fun starts.

Paul is a useless junkie and has been in prison for a number of years now, so he appointed his ex-wife, Paula, to represent his interests. Paula, however, has been MIA throughout this entire process. Brian has put in a ton of effort trying to find her but has come up with nothing. Now it's rumored that she, too, is in prison. In other words, there's no one representing Pam's 50% of the estate.

At the beginning of 2018, Brian and my wife sold Bob and Pam's house, expecting that the proceeds would go into the estate's bank account, to be distributed as described above (once those back taxes were taken care of). However, that didn't happen. Instead, the title company, in concluding the sale, pronounced that there were no other claims to the title and sent Brian and my wife a check each for 50% of the proceeds. They both deposited the checks into their respective bank accounts. My wife hasn't spent a penny of her share; Brian has probably spent some or all of his.

My questions:

• Were we correct in assuming that the money from the house should've gone straight into the estate account, since a) Bob's back taxes are still owed, and b) Paul is still due 50% of whatever's left after that?
• Since that didn't happen, what are the consequences of Brian and my wife having received all money from the house into their own bank accounts? (I don't know anything about how the IRS handles stuff like this.)
• Since Brian has been totally unable to locate Paula and since neither she nor Paul can be involved anyway (since he's a felon and, apparently, now so is she), what happens to Paul's 50% of the estate? Is there a point at which enough time passes that they no longer have a claim and then his 50% gets split between Brian and my wife?
• If my wife keeps her share of the house proceeds, then regardless of estate issues, we're assuming she would have to pay income tax on it for 2018. If she transfers the full amount into the estate account before the end of the year, would she then no longer be on the hook for those taxes?

Thanks in advance for any advice you may have on this one!

Estate Assets and Debts: Confusion About Money Received from Estate