Different debts are treated differently. The type of debt — secured or unsecured, sole or joint, statutory write-off — determines what happens. As executor, you must identify every debt before distributing a penny to beneficiaries.
Debts must be paid in a specific legal order under the Administration of Estates Act 1925. An executor who pays beneficiaries before creditors, or pays lower-ranked creditors before higher ones, becomes personally liable for the shortfall. This order is not optional — it applies to every estate.
Funeral expenses
First charge on the estate — paid before everything else. Reasonable costs for burial or cremation, headstone and memorial. Extravagant costs can be challenged by creditors.
Administration expenses
Executor costs, solicitor fees, HMCTS probate fee (£526), death certificate copies, RICS valuations — all paid from the estate before any creditors are settled.
Secured debts
Mortgages and secured loans — secured on an asset. The creditor can repossess the asset if payments stop. The estate either sells the asset to repay the debt or a beneficiary takes on the mortgage.
Preferential debts
HMRC tax arrears (income tax, PAYE, VAT) and certain pension contributions rank ahead of ordinary unsecured debts. File a final SA100 tax return and pay any outstanding amount before settling credit cards or loans.
Ordinary unsecured debts
Credit cards, personal loans, overdrafts, utilities, council tax arrears up to date of death — all rank equally. If the estate cannot pay them all in full, they are paid proportionately (pence in the pound).
Deferred debts
Debts owed to a spouse or civil partner — deferred behind all other creditors in an insolvent estate. In a solvent estate this distinction rarely matters.
Beneficiaries
What remains after all debts are paid passes to beneficiaries under the will or intestacy rules. In a solvent estate this is the expected outcome. In an insolvent estate, beneficiaries receive nothing.
The golden rule. Never distribute to beneficiaries until all debts are identified and paid. Even if beneficiaries are pressing for their share, distributing early in an insolvent — or potentially insolvent — estate exposes the executor to personal liability.
Creditors have rights against the estate, not against the family. Understanding this distinction protects you from being pressured into paying debts you are not legally obliged to pay.
Notify the executor in writing
Creditors can and must notify the executor of any outstanding debt. They should write to the estate, not contact family members personally. The executor must acknowledge the claim and include it in the administration of the estate.
Place a creditor's advertisement
Executors should advertise for creditors using a Section 27 Trustee Act 1925 notice in the London Gazette and local newspaper. This protects the executor from later claims — any creditor who fails to respond by the deadline cannot claim against an executor who has distributed in good faith.
Chase family for personal payment
Creditors cannot demand payment from a spouse, children or other relatives for debts in the deceased's sole name. If a creditor contacts you personally to pay a deceased person's debt from your own funds, you are not legally obliged to pay. This includes debt collectors acting on behalf of credit card companies.
Repossess assets without court order
Secured creditors can enforce their security, but unsecured creditors cannot seize assets without a court judgment. During estate administration, assets are frozen in the executor's hands. A creditor who wants to enforce against estate assets must apply to the court — they cannot simply turn up and take property.
An estate is insolvent when its debts exceed its total assets. This is more common than people expect — particularly when there is a large mortgage, personal loans, or unpaid care home fees. The executor's duties change significantly when an estate may be insolvent.
Stop — do not distribute
If you suspect insolvency, stop all distributions immediately. Paying a beneficiary before creditors are settled is a breach of duty that makes the executor personally liable to repay the amount to creditors. Even a small early payment can trigger personal liability.
Get a solvency assessment
Before doing anything else, compile a full list of all assets (at probate value) and all known debts. If liabilities exceed assets, instruct a solicitor experienced in insolvent estates immediately. The rules under the Administration of Insolvent Estates Order 1986 are different from ordinary estate administration.
Follow the statutory order strictly
In an insolvent estate, the statutory priority order is mandatory — not a guideline. Pay funeral costs, then administration expenses, then secured debts, then HMRC, then unsecured creditors proportionately. Deviate from this order and the executor faces personal liability to the creditors paid out of turn.
Unsecured debt is written off
Once the estate's assets are exhausted following the priority order, remaining unsecured debt — credit cards, loans, overdrafts — is written off. It does not pass to beneficiaries or family members. Creditors absorb the loss. This is the law, not a negotiated outcome — the executor has no discretion to treat creditors more generously than the order requires.
The complete executor toolkit — including how to handle every type of creditor
Includes the Section 27 creditor advertisement template, the letter to send each bank, a full debt-tracing checklist, and a timed action plan from day one through month twelve.
See what's included→The first-priority estate expense
What passes outside the estate
Why the account locked, and what unlocks it
What to do right now
The notice that caps an executor's liability for debts nobody knew about
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