Small or insolvent estates: problems with executorship?
Even small estates need an administrator or executor to ensure all legal duties are discharged; and in insolvent estates this is particularly important, as the creditors must be notified and funds must be apportioned carefully under the relevant legislation to ensure that no lenders are being defrauded.
There are very strict rules regarding the hierarchy of apportionment for different types of debt (secured, funeral, testamentary, preferential, unsecured, deferred, etc). Some gifts will need to be used up entirely; others need to be reduced “pro rata” in order to pay off debts equally between certain beneficiaries. The rules of “abatement” and “ademption” need to be followed to the letter. One might consider an expert probate service in such circumstances, to ensure that the estate is not to fall foul of this intricate regime.
However, the fees of a professional executor can eat away at such small estates even further. Paradoxically, a small or insolvent estate can take even longer to finalise if there is any dispute over how the few remaining funds are to be distributed: among various creditors, beneficiaries or executors.
It is good practice to consider these outcomes when dealing with small or precarious estates. Be honest and cautious, and explain the difficulties at hand. It might be worth considering insurance or other products; but generally it is best if a responsible family member can undertake the administration, so that the additional considerations of a professional executor do not complicate matters unnecessarily.
Further, if an estate is “property rich but cash poor,” note that there can be severe difficulties in administration from the lack of liquidity. Probate costs, Land Registry charges, debts and other costs and liabilities will need to be paid somehow. Sometimes the residuary beneficiaries may be able to front these costs in order to receive an unencumbered property; however, sometimes a charge needs to be placed on the property value to cover these costs; and often, it becomes a question of selling the property to make liquidity. This eventuality needs to be considered very carefully by testators who are low on ready assets.
The SWW Trust Corporation cannot administer to insolvent estates; however we can be of assistance in small estates, either through our Grant Assist service, our Trusts services or our hourly-rate service for guidance and assistance, as might be appropriate in any given matter. Naturally the smaller the estate, the less appropriate it will be to employ professional assistance.