If someone has been appointed as the executor of someone’s estate in their Will, while that person can refuse to accept the appointment, once they act on behalf of the estate, in principle they cannot then ‘resign’ from the responsibility.
If you are in the role of executor, it is fairly easy to unwittingly carry out an act which demonstrates your acceptance of the role. While this is not usually a problem, when the estate in question is insolvent the situation can get very complicated. For example, if the deceased’s liabilities exceed the available assets and the estate is insolvent, the executors have a duty to administer it in the best interests of the creditors, not of the beneficiaries.
Managing an insolvent estate
Before any legacies are paid, all debts must be paid, and if this is breached then the executors may be required to refund the value of any legacies that have been paid from the estate.
A solution to this problem is for the executor to pass the administration of the estate to a qualified insolvency practitioner through an Insolvency Administration Order (IAO).
This means that the estate is administered in a similar way to a bankruptcy. Any legal proceedings against the estate are stayed and the executives are protected from personal claims. The IAO is deemed to start at the date of death, and a creditors’ meeting must be held and a statement of affairs prepared. The deceased’s assets are collected in and distributed according to the priorities set out in insolvency law, with their beneficiaries being last in order of right to be paid.
How can Nelsons help?
For more advice or to comment on this article, please contact a member of our expert Wills, Trusts and Probate team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.