When a person dies, any debts they may have owed at that date do not die with them. There are many tasks that must be finalised when dealing with their estate, including settling debts and liabilities. It is important that the estate is dealt with in line with the law and this process is commonly known as Probate. This is the formal process of administering and settling a deceased persons’ estate and it involves identifying their assets, settling any debts and liabilities, and distributing the remaining assets to their beneficiaries.
Who has the responsibility?
The person responsible for managing the estate is known as the ‘Executor’ (when appointed in a Will) or the ‘Administrator’ (if there is no Will). The umbrella term of ‘Personal Representative’ covers both and will be used for this article.
The Personal Representative has a variety of legal responsibilities and duties, a primary one being to identify and settle any outstanding debts that the deceased may have left behind. The Personal Representative is not personally liable for these debts, and they must be settled from the estate.
Identifying Debts and Liabilities
The Personal Representative must gather information about any debts that the deceased owed at the time of their death. This should include information about the creditors and the amounts owed to them.
Common examples of debts and liabilities include:
The Personal Representative must ensure that all debts are identified and paid by the estate before any distributions are made to the beneficiaries.
Priority of Debts
Where the estate is insolvent, i.e., if there is not enough money in the estate to pay all the debts, then Personal Representatives must follow strict rules about how the funds are distributed and, in some cases, beneficiaries may not receive an inheritance.
The debts must be repaid in a specific legal order of priority before distributing the estate to the beneficiaries and this is:
Protection for the Personal Representative
Personal Representatives are legally responsible for ensuring the debts and liabilities are handled correctly and if there are any debts which are missed or if an estate is mismanaged (even by an honest mistake), they could be held personally liable. Therefore, they can protect themselves by:
Do you need a Solicitor?
The benefit of instructing a solicitor to deal with the administration of an estate on your behalf ensures that all debts and liabilities are dealt with correctly. This not only provides support and knowledge which can be invaluable, it also provides reassurance that you will not be held personally liable if mistakes are made.
If you would like to discuss Probate or Estate Planning and how we may be able to help, please give our friendly team a call on 0116 212 1000 or 01858 445 480 or complete our Contact Us form.
