If you’re the executor of an estate and you just found out it’s considered insolvent, you might be confused about what this means. Simply put, an insolvent estate is in debt, as the liabilities and debts are greater than the assets. This can make it difficult to carry out your loved one’s wishes as stated in the will, so you should talk to a Minneapolis estate planning attorney to learn what to do next.
How Is an Insolvent Estate Handled?
Before you can distribute any assets to the beneficiaries, you need to make sure creditors are paid. This can be very difficult to do with an insolvent estate since there is rarely enough money to pay the creditors, let alone the beneficiaries. It’s important to note that certain bills are supposed to get paid before others, with this being the order of priority:
- Secured creditors, such as a mortgage or a car loan
- Funeral and burial costs
- Testamentary and administration costs
- Preferential creditors
- Unsecured creditors
- Interest from unsecured loans
- Deferred debts
As the executor, you’re expected to pay these creditors in the right order. Talk to a lawyer if you have any questions about this step.
What Are Your Options As Executor?
As the executor of an insolvent estate, you might wonder if there’s anything you can do to help the beneficiaries have a chance of getting the assets your loved one wanted them to have. While it is your job to pay creditors first, you may be able to eliminate some debts or even find money that will help pay down the balance.
First, you can verify each debt, meaning you should research every claim to make sure the estate actually owes it. It may turn out that the debt cannot be pursued after the deceased has passed away. The debt may also be past its statute of limitations, so the creditor cannot collect on it. Additionally, you might discover that it was already paid, so do not pay any creditors until you have verified the debts.
You should then find out if your loved one had a life insurance policy. If so, you might be able to use that money to pay off some debts. You might also be able to sell some assets from the estate, such as furniture and electronics, to pay down what is owed.
Can a Lawyer Help?
Being the executor of any estate can be complicated, but an insolvent estate is much more challenging. This is why you should hire a lawyer who can help you through probate and ensure that every step has been taken to get creditors paid.
Whether you just began the process of dealing with the estate or need legal guidance after months of trying to work it out on your own, contact our Minneapolis law firm at 612-448-9653. Our lawyers understand the complexities of handling an insolvent estate in Minnesota, so we’re ready to help you.