Meaning of solvent

The Rules applicable to the payment of the deceased’s debts and funeral and testamentary expenses depend on whether the Estate is solvent or insolvent. A solvent estate is one where the assets are sufficient to pay the funeral, testamentary and administration expenses, debts and liabilities in full. It is irrelevant whether or not legacies can be paid in full in terms of deciding whether or not an estate is solvent.

If there is doubt as to whether an estate will turn out to be solvent or not, the personal representatives (PRs) should consider following the statutory order for the payment of debts in an insolvent estate as set out in Schedule 6 to the Insolvency Act 1986, which provides an order of priority for the settlement of the deceased’s debts and funeral and testamentary expenses.

For information on the statutory order for payment of debts in an insolvent estate, see Practice Note: Payment of debts—insolvent estate.

The rules for determining where debts and liabilities fall in a solvent estate are found in section 34 of the Administration