{"id":3468,"date":"2021-06-25T10:30:26","date_gmt":"2021-06-25T09:30:26","guid":{"rendered":"https:\/\/www.tayloremmet.co.uk\/blogs\/?p=3468"},"modified":"2021-06-25T10:30:26","modified_gmt":"2021-06-25T09:30:26","slug":"administering-an-estate-with-significant-debt","status":"publish","type":"post","link":"https:\/\/www.tayloremmet.co.uk\/blogs\/administering-an-estate-with-significant-debt\/","title":{"rendered":"Administering an estate with significant debt"},"content":{"rendered":"

Administering an estate with significant debt is a huge responsibility and one you might not want to take on, as Clare Gorman explains\u2026<\/p>\n

My brother has passed away leaving an outstanding loan. As his executor, am I responsible for paying it back?<\/h3>\n

When someone passes away with debts in their sole name, they do not pass to anyone else, unless another person acted as guarantor, or in certain situations, where the deceased gifted money before they died.<\/p>\n

Many people believe debts are automatically written off when you die, but this isn\u2019t true. The loan would need to be paid from your brother\u2019s estate.<\/p>\n

Once you have established the value of your brother\u2019s assets, for example, his property, savings, investments, etc. you can establish if there are sufficient funds to cover the loan. If so, it would need to be repaid before the remaining estate can be distributed among his beneficiaries.<\/p>\n

I\u2019m not sure if my brother had other debts. How do I find out?<\/h3>\n

Part of acting as an executor or personal representative is taking reasonable steps to establish what debts might be owing and if there is enough value in the estate to cover them.<\/p>\n

Checking paperwork and bank statements is always a good place to start, however, some debts might not be evident from these alone. It may be useful to carry out a search to look for unclaimed assets and liabilities and we can help you with this.<\/p>\n

It is also advisable to place an advert is the London Gazette and local newspapers requesting unknown creditors come forward. This offers an executor protection, should more debts surface at a later date.<\/p>\n

If the debts are greater than the value of the estate, what happens then?<\/h3>\n

If your brother had more debts than assets, the estate is classed as insolvent. This means the beneficiaries won\u2019t receive anything and instead, all assets must be used to clear the liabilities.<\/p>\n

In these situations, it is important that executors and other personal representatives seek professional advice because creditors need paying in a particular order. If this is not adhered to, you can become personally liable.<\/p>\n

The order of priority is:<\/p>\n

1. Secured debts, such as mortgages or hire purchase agreements on a car<\/p>\n

2. Funeral expenses and costs relating to the administration of the estate<\/p>\n

3. Preferential debts, which are quite rare, but could include wages due to an employee for example, a carer<\/p>\n

4. Unsecured debts, such as credit cards, loans and utility bills<\/p>\n

5. Interest due on preferential and unsecured debts<\/p>\n

6. Deferred debts, for example, a loan from the deceased\u2019s spouse.<\/p>\n

Assuming my brother\u2019s estate is insolvent, do I have to act as executor?<\/p>\n

Put simply, no. If you are appointed as an executor, you are not obliged to act on the deceased\u2019s behalf.<\/p>\n

When an estate is insolvent, it can be best to renounce your role as executor before getting involved. It can then be left up to the creditors to sort out.<\/p>\n

However, you can only renounce your role as executor if you have not \u2018intermeddled,\u2019 which means you haven\u2019t become actively involved in the administration of the estate.<\/p>\n

If you suspect your brother might be insolvent, it is best to seek advice as early as possible so you can consider your options.<\/p>\n

To find out more about administering a deceased estate, why not book a free 30-minute consultation with one of our probate specialists? Telephone (0114) 218 4000<\/span><\/strong>, email: info@tayloremmet.co.uk<\/strong><\/span><\/a> or complete this form<\/a><\/strong><\/span>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Administering an estate with significant debt is a huge responsibility and one you might not want to take on, as Clare Gorman explains\u2026 My brother has passed away leaving an outstanding loan. As his executor, am I responsible for paying it back? 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