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Deceased Estate Debts

I am often asked by clients acting as Executors or Administrators of a deceased Estate how to manage and pay the debts of a deceased Estate.

Before paying the debt of an Estate, an Executor or Administrator should consider the following:

  1. Whether the deceased’s Estate is liable to pay the debt;
  2. Whether the Executor/Administrator is authorised to deal with the debts of the Estate;
  3. Whether payment of the debt can be deferred;
  4. Whether the assets of the Estate are sufficient to allow for the debts to be paid; and
  5. Whether the Estate is insolvent.

It is important to obtain advice on the above when considering some of the issues below which are faced by an Executor/Administrator.

Should the Executor or Administrator of an Estate repay any debts of the deceased (Estate Debts)?

It is important for an Executor/Administrator to determine the assets and liabilities of the Estate when making a determination to repay an Estate debt. In some instances, parties to whom debts are owed may enter into special arrangements regarding debts owed by the deceased’s Estate.

Should the Executor or Administrator of an Estate personally pay funeral expenses?

In most instances, an Executor or Administrator will personally pay funeral expenses after the death of a deceased as there is insufficient time to access the deceased’s funds and funeral insurance plans. If an Executor or Administrator is satisfied that there are sufficient funds in the Estate to reimburse them for the payment of the funeral expenses, then they should proceed with the payment. Further, any party who has paid for reasonable funeral expenses, is entitled to be reimbursed by the Estate for such expenses.

Can an Executor or Administrator access the deceased’s bank account to pay debts?

Only an authorised Executor or Administrator who has obtained a Grant of Probate or Letters of Administration should operate an account which is solely in the name of a deceased. The proper course is to close the deceased accounts, and to open an account in the name of the executor as trustee of the deceased estate.

There may be circumstances where a bank will enter into special arrangements with a potential Executor or Administrator to facilitate the payment of the deceased’s bills/accounts, however, this will depend on each bank.

Prior to making any payments, you should consider whether there will be sufficient funds in the account to cover direct debits such as home insurance.

How does an Executor or Administrator know if the deceased has sufficient funds in the bank to pay debts?

Financial institutions may provide a potential Executor or Administrator with this information. However, any superannuation accounts, life insurance policies, funeral insurance plans and other assets of the Deceased will need to be investigated to form a determination as to whether the deceased will have sufficient funds to pay all of their debts.

What if the deceased Estate is Insolvent and can’t pay any of its debts?

If an Executor or Administrator considers that the Estate is insolvent (that is, it has insufficient funds to pay its debts), they should obtain legal advice prior to attending to any payments on behalf of the deceased Estate.

There may be serious implications for an Executor or Administrator if one type of debt is paid in priority to another. This could include the executor being personally responsible for a debt.

If you have been appointed as an Executor or Administrator of an Estate, it is important that you obtain advice in relation to payment of deceased Estate debts. Should you have any questions in relation to Estate Debts, please do not hesitate to contact me.

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The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, Wills, Estates and Probate Lawyers (WEP Lawyers) cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. WEP Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. WEP Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.

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Chloe Kopilovic

Written by—

Chloe Kopilovic

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