Administration of estates (solvent estates - secured debts) (Administration of estates)-FS Flashcards
(8 cards)
What is a solvent estate in the context of estate administration?
A solvent estate is one that contains sufficient assets to pay all the deceased’s debts, liabilities, and expenses in full.
Which statutory provision governs payment of secured debts from a deceased’s estate?
Section 35 of the Administration of Estates Act 1925 governs the treatment of secured debts.
Who is responsible for repaying a secured debt when a beneficiary inherits the charged asset?
The beneficiary inheriting the charged asset is responsible for repaying the associated debt, unless the will shows a contrary intention (per s.35 AEA 1925
What is meant by a “contrary intention” under Section 35 of the Administration of Estates Act?
A specific provision in the will stating the asset should pass “free of mortgage” or similar language that expressly overrides the default rule in s.35.
Does a general direction in a will to pay debts out of the residue displace Section 35’s default rule?
No. A general direction to pay debts from residue is not sufficient to constitute a contrary intention under s.35.
What happens if a will states a property is gifted “free of mortgage”?
The debt will be paid out of the residuary estate, and the beneficiary is not personally liable for the secured debt on the asset.
What is a Secured Debt
A debt that is secured against a specific asset (e.g. mortgage or charge), allowing the creditor to recover their money by selling the asset if repayment is not made.
In what order are estate assets applied to cover debts in a solvent estate?
According to the order set out in Sections 34 and 35 of the Administration of Estates Act, starting with personal assets not specifically bequeathed and moving down the statutory hierarchy.
