insolvent estate

The estate of a deceased person is insolvent if, when all assets are realised, it will be insufficient to meet in full all the debts and other liabilities to which the estate is subject. An estate is not insolvent if debts and liabilities can be settled even if none of the legacies can be paid.

If an estate is insolvent, the beneficiaries under the Will or those entitled 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, the PRs must observe the prescribed order for payment of any debts and liabilities.

For a broader introduction to and further information on insolvent estates, including the test of insolvency and methods of administration, see Practice Note: Insolvent estates and bankrupt beneficiaries.

The Law Society has issued guidance on the administration