What to do if you have recently lost a close relative

If you have recently lost a close relative, and have been named executor of their estate, it is important to have a basic knowledge of probate law in order to understand and implement your responsibilities lawfully and effectively. It could be that you have become executor to an insolvent estate; in which case, this article will provide you with a brief summary of your obligations in this area and the order in which debts should be paid.

Common misconceptions

It is a common misconception that when someone passes on all of the debts are automatically wiped. This is not true. The idea is that the debts are all paid with the money that is left over from the estate (for example the sale of a house will pay off debts). However, when the value of the debts exceeds the value of the estate you have an insolvent estate.

Another common misconception is that solicitors will charge the earth for the handling of an insolvent estate. Here at Seatons we have understand that the passing of a loved one is a difficult time for all the family and we will not waste time. We endeavour that your families’ estate will be dealt with in a fast and efficient manner and all our costs will be laid out clearly for you so you and your family can sleep easily at night.

Your responsibilities

As the executor of an estate it is your responsibility to ensure that all debts are paid off. If the estate is insolvent, it must be administered in accordance with the Administration of insolvent Estates of Deceased Persons Order 1999. This is a greatly complicated process and every independent advisor will recommend that you seek legal advice on the next steps to take.

Grant of what?

A Grant of Probate provides legal authority for Personal Representatives to administer and distribute the deceased’s estate. Without this document, banks, Building Societies, insurance companies and other similar organisations will not hand over the deceased’s assets. Here at Seatons we endeavour to make the process as fast as possible. We also keep you up to date with what we are doing so you don’t feel like we’ve lost touch.

Priorities in which Debts should be paid

It is important for the Personal Representative to be aware that in the case of an insolvent estate, the creditors are entitled to be paid in a strict order of priority which is:

(a) Funeral, testamentary and administration expenses, then
(b) Other debts in accordance with a bankruptcy order.

For unsecured debts, payment should be made on a pro rata basis in proportion to the net assets and the value of each individual debt paid from the insolvent estate. This order of payment cannot be varied by the Personal Representative, or under the terms of the will or intestacy rules.

If the Personal Representatives do not follow the statutory order under the insolvent estate, they will incur personal liability for “superior” debts that have been left unpaid. Therefore, if there is any possibility that there is an insolvent estate, the personal representatives should observe the statutory order strictly when paying debts.

In practice therefore, if the total assets are worth £10,000 and the funeral and testamentary expenses amount to £2,000 and there are other unsecured debts totalling £16,000, then the creditors will receive 50% of their outstanding debt.

Who to call?

Here at Seatons we have an expert team of lawyers who can help you through the difficult process of executing an estate. We particularly specialise in helping where there is an insolvent estate. We offer a free no obligation chat where we can assess your situation and give you advice on the next steps to take. So call us today on 0800 3 10 11 12.