Being the executor of a will means handling the affairs of a deceased loved one's estate. This is no easy task, and many executors need the support of a professional estate litigation lawyer. One of the trickiest aspects of estate litigation is dealing with your loved one's creditors. If your loved one has a mix of debts and assets and you are the executor of their will, you need to understand your duty to creditors and the differences between solvent and insolvent estates. This article will help you understand the basics of these topics.
Creditors and Estates
Debts don't disappear on death. Instead, when a person with unpaid debts dies unexpectedly, they leave behind both their assets and their debts as their estate. Their creditors, who hold their debts, have a right to be paid before potential heirs do. It is the executor's duty to find and contact all of the deceased person's creditors so they can get what they are owed.
If your loved one had many creditors, you will likely need a lawyer's help with this step. If all goes well, this process should be resolved quickly. If you miss a creditor, however, they can open an estate litigation case. They typically have two years to do so; after that point, they have no claim to the estate's assets. You will almost certainly need an estate litigation lawyer to help you navigate the litigation process if a creditor you have not contacted files a claim against the estate.
Assets and Debts
As long as the estate you are the executor of has more assets than debts (a solvent estate), the process of debt payment should be easy. All creditors get what they are owed, and all heirs get their share of what is left. Estate law gets more complicated when an estate has more debts than assets. In this case, the estate is considered insolvent, and some creditors won't get paid. The Canadian legal system has a clear hierarchy of debts that ensures the most important debts get paid first. Debts are paid in the following order:
- Secured debts
- Funeral expenses
- Estate administration expenses
- Debts with legislative priority
- Unsecured debts
If you are the executor of an insolvent estate and you aren't sure which debts should be paid, you will almost certainly need to work with an estate litigation lawyer. Since laws vary by province, make sure you choose a lawyer who has experience working with insolvent estates in your area.
Contact an estate litigation law firm in your area for more information.