Paying the deceased's debts

Debts may include a mortgage, money owed to individuals, money owed to companies, overpayments of tax repayable to HM Revenue & Customs, and post-death costs such as funeral expenses and legal expenses.

Inheritance tax is not treated as a debt.

Contacting creditors

After death, contact all creditors (the people to whom debts are owed), advise of the death and ask for a repayment figure. Ask if interest is accruing (if so, ask if it can be frozen). For mortgages, ask if the mortgage can be frozen. See our guide “How to value a mortgage”.

During the probate process, keep creditors informed of progress. Mortgage companies will ask for an estimated timescale, and you may receive calls from them every months or so requesting an update.

When to pay debts

As soon as the estate has funds, for example from closed bank accounts or from the sale of a house, you may be in a position to start repaying debts. In many cases, this will be after the grant of representation has been received.

You may have to wait until the deceased’s house (if any) has been sold, which could mean that repaying debts is subject to some delay.

All debts should be paid before you begin to distribute the estate to beneficiaries.

Solvent estates

If the estate is solvent (it can pay all the deceased’s debts), the debts can be paid in any order.

However, you may wish to bear in mind the order of priority which applies to insolvent estates (see below).

Consider the terms of the debts. If interest is accumulating on a particular debt, perhaps this should be paid first.

Insolvent estates

If the estate is insolvent, certain rules apply. They must be followed carefully. In this case, we recommend taking advice from a probate solicitor or other legal professional.

Insolvent estates must follow an order of priority. At the top of the order are:

1. Secured debts, such as mortgages; and
2. Funeral bill, funeral expenses and other post-death expenses such as legal costs (known as “testamentary and administration expenses”).

Other types of debt come after.

This order does not have to be followed if the estate is solvent, but you may wish to do so anyway.

The Probate Wizard cannot be used to administer an insolvent estate.