Help with Deceased Estates
It may not be the first thing on our minds when a loved one passes away but dealing with an insolvent estate after a death can be emotive as well as complex.
To find out more about managing your money and getting free advice, visit Money Helper, an independent service set up to help people manage their money.
Introduction
It is a common misconception that that a debt in written off after an individual passes away. This is untrue as any debts need to be paid from the deceased estate before any beneficiaries receive any inheritance.
When an individual dies, no one is required to settle their debts unless the debts were in joint names, such as a joint loan or overdraft. However, if the deceased individual had assets, they are used to repay debts before beneficiaries can receive any inheritance. This underpins the main role of an executor.
If the deceased person’s debts are greater than the total value of assets within the estate, the estate is insolvent.
If correct rules and procedures are not followed, or mistakes are made, the person or people administering the estate could be held personally liable.
Below we discuss what happens when an estate is bankrupt, who administers the estate of a bankrupt person, and how Wylie & Bisset LLP can assist with any deceased estate queries.
When Is An Estate Bankrupt?
Bankruptcy is the legal process that is followed when someone has become insolvency. The Scottish term for bankruptcy is sequestration.
After someone passes away, their estate is insolvent when there is not enough money to pay off their debts.
If an executor is appointed and it is established the deceased estate is insolvent, then they have an obligation to take steps to sequestrate the estate.
If there is no executor appointed, then anyone entitled to act as one can take steps to place the estate into insolvency.
Using Bankruptcy Of A Deceased Estate As A Useful Tool To Repay Debt?
Under Section 14 (3) of the Bankruptcy (Scotland) Act 2016 , an executor or anyone entitled to be appointed as an executor can apply to the Accountant in Bankruptcy for the bankruptcy of the deceased estate. The application must be made no longer than 12 months after the day in which the executor knew, or ought to have known, that the estate was insolvent and likely to remain so.
This removes the need for formal confirmation and appointment of an executor. The Accountant in Bankruptcy then processes the application to sequestrate the estate. The estate funds can settle executor fees.
We have experience in dealing with insolvent deceased estates. Our team can assist with the application and formal appointment as a Trustee.
Who Administers The Estate Of A Bankrupt Person?
Once a person is declared bankrupt, their estate is sequestrated, and a Trustee is appointed. The Trustee is legally entitled to administer the estate of the deceased.
Get In Touch
- Are you the executor of an insolvent estate? For an initial discussion about your position, contact our in-house expert, Paul McDougall.