Settling Estate Debts during Probate

25 August 2017

If someone is in debt when they die, those responsible for administering the Estate must ensure that these debts are paid. 

How to Settle Estate Debts

If you have been appointed as an Executor in a Will, you will have a number of responsibilities to carry out when the ‘Testator’ (meaning the person who wrote the Will) dies.

One of these responsibilities will be to ensure that any outstanding debts are paid from the Estate funds. To do this, you need to make a list of all the outstanding debts that you know about. These might include utility bills, phone bills, loans or credit cards bills.

Next you need to find out whether these debts were held in the deceased person’s sole name, or whether they were held in joint names with someone else. If the debts were held in joint names and the other person is still alive, the debt can be transferred into that person’s sole name.

But if the deceased person held the debt as an individual, you need to check whether he/she had any insurance policies that take effect in the event of their death. For example, there might be a life insurance policy that will pay off the remainder of the mortgage loan.

Once you’ve done this, you should have a good idea as to how much debt the deceased person owed. However, you need to make sure that there is enough money to actually pay for it. This is known as having a ‘solvent Estate’.

If the deceased person has not left enough money to pay off their debts – called an ‘insolvent Estate’ – you need to seek specialist legal advice.

If you believe the Estate to be solvent, you need to make sure that you are aware of all the debts the deceased owed. There may be some that you don’t know about, and if you fail to pay them while administering the Estate, you will be held liable. This could result in you having to pay the debt out of your own pocket.

To avoid this, you should place a ‘Deceased Estates Notice’ in the London Gazette and the newspapers local to where the deceased person lived. These notices announce the death and ask any creditors to come forward. The notices should remain in place for at least 60 days.

Once 60 days have passed, you can rest assured that you’ve done all you can to find any creditors. It’s true that creditors may come forward later down the line, but you can’t be held personally accountable for failing to find and pay them.

When you have obtained the Grant of Probate from the Probate Registry, you can then set about paying off the debts. The Grant of Probate will enable you to access the deceased person’s bank accounts, so you can pay the debts using the funds in the Estate.

Only after you have paid all the outstanding debts can you distribute the remainder of the Estate to the beneficiaries.

With our Probate Complete Service we take full responsibility for getting Grant of Probate and dealing with the Legal, Tax (excl VAT), Property and Estate Administration affairs.

Help with Probate

As an Executor or Administrator, you have a lot of responsibilities, including calculating and paying any taxes, and it can be a serious burden to take on. If you fail to carry out any of your Executor duties properly – for instance, you fail to find and pay any creditors – then you could be held accountable.

Many Executors and Administrators choose to ask a legal professional to help with the Probate and Estate administration process. This removes the worry and limits the risk of mistakes being made.

If someone has died and you need help with probate, contact us:

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