Payment of date of death liabilities

Trusts Discussion
1

I would be interested to hear your views on the following:-

I am dealing with an estate (Grant of Probate recently issued) where the Executors have been notified of a civil claim against the estate. The cause of action was pre-death. The value of the claim will not be known for a few more months. Once confirmed, the claim will become a date of death liability of the estate.

Whilst they are waiting for the claim amount to be confirmed, can the Executors use the estate funds to pay any of the other (already known) date of death liabilities? Or do they have to wait until the claim amount is known (as this may be so high that it may not only wipe out all legacies but also reduce the funds available to pay the date of death liabilities)? In other words, the currently presumed solvent estate may become an insolvent estate, depending on the claim amount.

Many thanks,

Hauke Harrack
Hewitsons

2

My understanding is that once the executor is on notice they put themselves at risk if they “prefer” another creditor by paying them in full even though they understand that the estate may be insolvent.

Having said that, some liabilities, such as the funeral expenses, are “preferred”, and can usually be paid in full even if the estate is insufficient to satisfy all other liabilities.

If the estate proves to be insolvent, a question mark may also arise over the costs of administering the estate and consideration should be given to instructing an insolvency expert to advise on the distribution of the assets. Curiously, I understand the fees of such an adviser should be payable in full, even though those of a professional executor will be reduced as a non-preferred liability of the estate.

Paul Saunders

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