Are personal representatives responsible for a deceased’s debts?
After a person dies, a personal representative, such as an executor or an administrator of a person’s Will, might be responsible for settling their debts such as any unpaid taxes, loans and bills.
Typically, a personal representative is not personally liable for these debts, but there are certain situations where they could be held accountable.
This potential liability means there are some important things to bear in mind if you’re to protect your own assets as well as those of the deceased.
You should make sure you settle all outstanding debts before distributing any of the estate assets. If you fail to do this and the estate runs out of funds, you could be personally liable to creditors.
Additionally, you should notify potential creditors correctly - and if you fail to do this, you could be held personally responsible - even if you were unaware of the debt.
Exercise caution if you’re handling an insolvent estate. This is because you must follow specific rules on debt prioritisation - if you pay creditors in the wrong order, you could be personally liable for unpaid debts. Similarly, if you neglect to pay inheritance tax, HM Revenue & Customs may pursue you personally.
Personal liability can also arise from:
Mismanaging overseas debts
Failing to properly address joint debts that the deceased shared with others
Signing a guarantee for the deceased's debts, as you may be personally liable if the estate cannot repay it
If you distribute estate funds to a beneficiary who is bankrupt, there is also a risk that you may also be held personally liable to the Trustee in Bankruptcy for those funds.
To avoid getting caught out and being held personally liable, you should follow legal procedures, such as placing statutory advertisements, keeping accurate records and seeking legal advice. By doing this and acting diligently, you can ensure proper estate administration while protecting yourself from liability.
Contact Daniel to discuss this further.
