Payment of debts—insolvent estate
Payment of debts—insolvent estate

The following Wills & Probate guidance note provides comprehensive and up to date legal information covering:

  • Payment of debts—insolvent estate
  • Insolvent estate
  • Test of insolvency
  • Methods of administration
  • The statutory order
  • Priority for funeral, testamentary and administration expenses
  • The bankruptcy rules—general
  • Unsecured creditors
  • Excluded claims
  • Failure to observe priority order—superior class
  • more

Insolvent estate

If an estate is insolvent, the beneficiaries under the Will or the next of kin under the intestacy rules will receive nothing, nor will all the creditors receive full payment. The personal representatives (PRs) must pay creditors in the prescribed order or they may incur personal liability for debts in a higher category that have not been paid. If there is any risk that the estate may prove to be insolvent, observe the prescribed order for payment.

Test of insolvency

Section 421(4) of the Insolvency Act 1986 (IA 1986) provides a statutory test to establish whether an estate is insolvent: the estate of a deceased person is insolvent if, when realised, it will be insufficient to meet in full all the debts and other liabilities to w