Administration of estates (Insolvent estates) (Administration of estates)- FS

Question 1

What is an insolvent estate?

Answer 1

An estate is insolvent when the deceased’s liabilities and debts exceed the total value of their assets, meaning creditors may not be fully repaid and beneficiaries receive nothing.

Question 2

What is the consequence for beneficiaries of an insolvent estate?

Answer 2

: Beneficiaries receive nothing because the estate’s assets are insufficient to satisfy the deceased’s liabilities.

Question 3

What legal instrument governs the priority of debt repayment in insolvent estates?

Answer 3

The Administration of Insolvent Estates of Deceased Persons Order 1986.

Question 4

In what order must debts be paid in an insolvent estate?

Answer 4

1. Secured creditors
2. Funeral and testamentary expenses
3. Unsecured creditors (in equal proportions)

Question 5

What rights do secured creditors have in an insolvent estate?

Answer 5

They can exercise their security by selling the charged asset and taking the proceeds before other claims are addressed.

Question 6

How are unsecured creditors paid in an insolvent estate?

Answer 6

From any remaining assets after secured debts and funeral/testamentary expenses are paid. If funds are insufficient, unsecured debts abate proportionally.

Question 7

What approach should personal representatives take if unsure whether an estate is solvent?

Answer 7

They should administer it as insolvent to avoid liability for failing to follow the statutory payment order if insolvency is later confirmed.

Question 8

What liability may arise for personal representatives who do not follow the correct payment order in an insolvent estate?

Answer 8

They may be held liable in negligence for breach of duty.