Collecting and Realising Assets

Question 1

Who must PRs pay before distributing the estate to beneficiaries?

Answer 1

Estate creditors

Question 2

Should PRs sell any property specifically gifted in a will to pay debts?

Answer 2

No - unless other assets have been exhausted

Question 3

What is a solvent estate?

Answer 3

One where the reasonable funeral, testamentary, and administration expenses, debts, and other liabilities can be paid in full

Question 4

For solvent estates, a secured debt should be discharged from what?

(subject to contrary intention shown in the will)

Answer 4

The property against which it is secured

Question 5

For solvent estates, Unsecured creditors should be paid in which order of estate assets (2)?

Answer 5

1. Property undisposed of by the will
2. Residue

Question 6

For solvent estates, If the will provides debts shall not be paid from residue, they will instead be paid from which 3 sources in order?

Answer 6

1. Property the will provides/is charged is to be used for debts
2. Pecuniary legacies
3. Property specifically devised or bequeathed

Question 7

What is an insolvent estate?

Answer 7

One that doesn’t have sufficient funds to pay reasonable funeral, testamentary, and administration expenses, debts, and other liabilities in full

Question 8

In what order of the two types of debt should be paid out of an insolvent estate?

Answer 8

1. Secured debts
2. Unsecured debts

Question 9

In what order should unsecured debts be paid out of insolvent estate (5 categories)?

(clue: F.P.O.I.D)

Answer 9

1. Funeral and admin. expenses
2. Preferred debts
3. Ordinary debts
4. Interest on preferred and ordinary debts
5. Deferred debts

Question 10

What are preferred debts?

Answer 10

Wages and salaries of D’s employees in the 4 months prior to death

Question 11

What is the maximum amount that can be claimed for each employee of a preferred debt?

Answer 11

£800

Question 12

What 2 types of funds can ordinary debts apply to?

Answer 12

1. Owed to HMRC
2. Balance of preferred debts

Question 13

Deferred debts include loans from who?

Answer 13

The deceased’s spouse

Question 14

Unsecured detbs are paid with each creditor within the same ____ ranking ________, so if money runs out in it, their payment ______ (reduces) _______________

Answer 14

rank, equally, abates proportionately

Question 15

What happens if a PR pays a category of debt knowing there are higher ranking debts and there’s insufficient assets to pay the higher ranking debt?

Answer 15

The PR is personally liabe