What is an insolvent estate?
4 November 2019 by Jane Golding
At the end of the financial year ending March 2019, the UK general government gross debt was £1,821.3 billion. That is equivalent to 85.2% of gross domestic product. The average UK household debt now stands at a record £15,400.
Britain’s average household debt mountain has reached a new peak, with UK homes now owing an average of £15,385 to credit card firms, banks and other lenders.
An Insolvent Estate is left when a deceased person’s debts are greater than the total value of assets, and therefore money is owed to their creditors. The rules of Bankruptcy apply to Insolvent Estates, in that group creditors must be paid in a specific order of priority.
The Debts are paid to the extent that they can be, they are paid from your Estate before anything gets passed on to the Beneficiaries.
While Beneficiaries or family typically are not responsible for your Debts when you die, that does not mean they just go away. Personal debt cannot normally be inherited provided the debt was incurred in the name of the deceased only. There are two exceptions, the first of which is if the debt was guaranteed by a third party in which case the third party would become liable. The second is if the deceased had gifted money not long before the death which could be interpreted as an attempt to avoid payment to the creditors from the Estate.
However, for joint liabilities such as a Mortgage or Utility Accounts on which two or more people are named, the Survivor does become fully liable for continued payments. If there are any problems for the survivor meeting these commitments then it is better to contact the bank, building society or utility providers as soon as possible.
Extreme care should be taken in the Administration of an Insolvent Estate, where the value of the assets in the Estate amounts to less than the debt left by the Deceased.
If you have any concerns that your home may be at risk, please contact Fisher Jones Greenwood to assist in the Planning of your Future or the drafting of your Will, please contact us on 01206 700113 or email [email protected].to arrange a convenient appointment.