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June 20, 2025

Insolvent Estate Administration

Insolvent Estate Administration

by admin / Wednesday, 13 June 2018 / Published in Law, Law News

What happens if I die without enough assets to satisfy my debts?

 When someone dies with insufficient assets to meet the claims of their creditors, they leave an insolvent estate.

The Bankruptcy and Insolvency Act and the Trustee Act govern the administration of insolvent estates, and the legislation allows executors to pay for “proper funeral and testamentary expenses” of the deceased set out the priorities of the debts and claimants before to paying the other creditors. In order to ensure the funeral and burial expenses are paid and provides direction as to how the assets are to be dealt with.

“Testamentary expenses” include the reasonable compensation of the executor, as well as the reasonable accounting costs necessary for administering the estate.

The legislation instructs the executor to deal with the deceased’s creditors “proportionately and without any preference or priority of debts of one rank or nature over those of another”. As a general rule, a creditor responsible for 75% of the deceased’s debt will be entitled to 75% of the deceased’s assets.

What happens if I die without sufficient assets to both pay my debts and make all the bequests in my Will?

Abatement is the procedure used to reduce some or all of the bequests in an estate if there are insufficient assets to follow the testator’s wishes. There is a predetermined hierarchy of the order assets to be used to pay the debts.   The Abatement of assets continues down the list until the debts are paid.

What happens if my estate is insolvent, but I have joint property?

 When a joint-tenant dies on the face of it, title to the property passes to the surviving joint-tenant outside of the deceased’s individual estate. This means the property assets that pass to the surviving joint owner by right of survivorship and these assets do not form part of the assets of the estate.

Should I accept an appointment as Estate Trustee if the estate is insolvent?

The beneficiaries and estate trustee are not personally responsible for the payment of the debt of the deceased or estate.

However, if you do not to follow the proper procedures for dealing with the insolvent estate, you may be held personally liable to creditors who end up getting less than they were entitled to.

It depends on the facts and interpretation and certain cases operation of the law of resulting trust.

If you have questions about estate administration, contact Sweatman Law. We represent executors and beneficiaries in all types of estate matters. We will work diligently to protect your interests, thoroughly explain your legal options and provide you with knowledgeable advice. To schedule an appointment with one of our lawyers, contact Sweatman Law Firm.  

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