Coventry
Kenilworth
“Cover all
the angles”
Read more articles in: Blog, Private Client, Rachel Blackburn
When someone writes a Will, they will appoint up to four executors to administer their estate and carry out their wishes.
When they die, these people become responsible for managing the person’s assets and distributing them according to the Will – and meeting any liabilities against the estate.
This includes any debt that the person has not paid at the time of their death. Many people assume that unpaid debts are written off, but this is not automatically true.
There is usually a process that executors must follow to satisfy the debt to the best of their ability and that of the estate.
Identifying debts
Executors are responsible for determining the value of an estate to report any Inheritance Tax (IHT) to pay, and this is the point at which any debts need to be identified. These could include:
This information should be available from institutions such as banks and other lenders.
Once you have reported IHT liabilities and obtained probate, you should be able to access this information as a named executor.
Paying debts
The next step is to pay the debts out of the value of the estate. Debts are paid before any beneficiaries receive their entitlement, and it is the responsibility of executors to clear any debts before distributing assets.
This can be done using cash from the estate or the sale of assets such as property.
It is not uncommon to have unpaid debts upon your death. Many people have only small amount that need to be settled, but some may exceed the value of the estate – known as an ‘insolvent estate’.
If debts cannot be paid
Debts should be paid in order of priority until the estate runs out of money. This is typically:
Debts which cannot be paid out of the value of an estate are likely to be written off. Unless the debt is joint or another person is a guarantor, relatives are usually not expected to repay outstanding debts.
Protecting yourself
Creditors sometimes have a limited time to make a claim against the estate, usually within six months of the executor being granted probate.
Executors often place a notice in The Gazette and/or local newspaper to inform creditors of the death and invite any claims within a specific period. This can protect the executor from personal liability if debts come to light later.
Also remember that some assets such as life insurance may not form part of a person’s estate for the purpose of repaying debts, so make sure to check before turning an asset over to a creditor.
If you are struggling to pay debts as an executor, a solicitor can help you to prioritise and manage repayments and protect yourself, your loved one and beneficiaries.
For advice on dealing with debts on an estate, please contact the Mander Hadley Private Client team to speak to our probate and estate administration experts.
Head of Wills, Probate and Older Client Services
I joined Mander Hadley’s Wills, Probate and Older Client Services Team in 2018.I specialise in the preparation of Wills, Probate and estate administration, trusts and trust administration and Lasting Powers of Attorney. I also have experience of care fee planning and appeals of Continuing Health Care decisions.
Latest posts by Rachel Blackburn (see all)