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Insolvent Estates: A Nightmare For Beneficiaries And Personal Representatives


Unless the decedent planned out his or her estate down to the last detail and there is no family drama for which probate court to act as a venue, being the personal representative of a deceased person’s estate is a thankless job.  Even if you are a beneficiary of the will, and you get your inheritance once the estate settles, it is easy to feel resentful that you had to do all of this work to settle the estate while everyone else sat around criticizing you and demanding their money.  Everyone blames you when their inheritance gets smaller as you fulfill the decedent’s debt obligations as the law requires you to do.  The worst that can happen is that there is nothing left for the heirs to inherit once the personal representative has paid the debts.  An Orlando probate lawyer can help you if you have the unenviable task of settling an insolvent estate.

Robbing Beneficiaries to Pay Creditors

“Insolvent” is just a legal term for “flat broke.”  When an estate is insolvent, it means that the amount the estate owes in unpaid debts is greater than the value of its assets.  It is somewhat analogous to a secured loan being underwater or a person having a negative net worth.  No matter how wealthy or how poor the decedent, and no matter how many debts the decedent owed at the time of death, creditors have first pick of the estate’s assets.  Issuing a notice to creditors is one of the personal representative’s first duties after the estate opens for probate.  The creditors have a limited amount of time to file their claims with the estate.  Once the personal representative has paid the creditors’ claims or settled the debts for less than the creditors originally requested, then the estate can settle and the heirs can receive their inheritance from the estate’s remaining assets.

Which Creditors Get First Dibs on the Estate?

In cases where the decedent’s finances were a real mess, it may be obvious from the beginning that there will be nothing left for the heirs to inherit.  In fact, no amount of fancy math would make it possible to repay the debts in full.  The only possible outcome is that not all of the creditors get full payment.  In general, the creditors that file their claims first get first priority for repayment of the debts owed to them.  Whether the debts are secured or unsecured also makes a difference.  As when settling an estate where family members are feuding over their inheritance, there is no solution that will satisfy everyone.  If you are the personal representative of an insolvent estate, it is a good idea to hire a probate lawyer.

Contact Gierach and Gierach About Insolvent Estates

A probate lawyer can help you negotiate with creditors in the hopes of leaving some assets in an insolvent estate for the decedent’s family to inherit.  Contact Gierach and Gierach, P.A. in Orlando, Florida to discuss your case.



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