Collecting and Realising Assets Flashcards
Who must PRs pay before distributing the estate to beneficiaries?
Estate creditors
Should PRs sell any property specifically gifted in a will to pay debts?
No - unless other assets have been exhausted
What is a solvent estate?
One where the reasonable funeral, testamentary, and administration expenses, debts, and other liabilities can be paid in full
For solvent estates, a secured debt should be discharged from what?
(subject to contrary intention shown in the will)
The property against which it is secured
For solvent estates, Unsecured creditors should be paid in which order of estate assets (2)?
- Property undisposed of by the will
- Residue
For solvent estates, If the will provides debts shall not be paid from residue, they will instead be paid from which 3 sources in order?
- Property the will provides/is charged is to be used for debts
- Pecuniary legacies
- Property specifically devised or bequeathed
What is an insolvent estate?
One that doesn’t have sufficient funds to pay reasonable funeral, testamentary, and administration expenses, debts, and other liabilities in full
In what order of the two types of debt should be paid out of an insolvent estate?
- Secured debts
- Unsecured debts
In what order should unsecured debts be paid out of insolvent estate (5 categories)?
(clue: F.P.O.I.D)
- Funeral and admin. expenses
- Preferred debts
- Ordinary debts
- Interest on preferred and ordinary debts
- Deferred debts
What are preferred debts?
Wages and salaries of D’s employees in the 4 months prior to death
What is the maximum amount that can be claimed for each employee of a preferred debt?
£800
What 2 types of funds can ordinary debts apply to?
- Owed to HMRC
- Balance of preferred debts
Deferred debts include loans from who?
The deceased’s spouse
Unsecured detbs are paid with each creditor within the same ____ ranking ________, so if money runs out in it, their payment ______ (reduces) _______________
rank, equally, abates proportionately
What happens if a PR pays a category of debt knowing there are higher ranking debts and there’s insufficient assets to pay the higher ranking debt?
The PR is personally liabe