An insolvent estate is not necessarily a bankrupt estate.
An insolvent estate is an estate where there are assets, but unfortunately there are more debts than there are assets to pay them off. Being an executor is a tough job at the best of times. If you are an executor or administrator of an insolent estate that carries a lot of debt, the risks are higher. Creditors may sue the estate for what is owed. As executor/administrator you must follow the hierarchy for which creditors get paid out first. If you do not, you could potentially be sued by a disgruntled creditor.
An executor may want to consider renouncing at the outset – once you start, and have “intermeddled” in an estate it is then very difficult, and sometimes not possible to renounce, if you have begun dealing with the deceased’s affairs.
Another potential option, instead of administering the estate yourself, is to apply to Court for permission to have a Trustee in Bankruptcy appointed under the Bankruptcy and Insolvency Act. The Trustee in Bankruptcy would then assume responsibility for distributing the assets among the creditors.
If you do proceed as executor of an insolvent estate, at the end of the process you must prepare a full accounting of your time as executor, and ask the creditors to release you from any claims. The better option is apply to the Court for a Release as executor – as it is the Court formally discharging the executor from their role. This protects the executor from future claims. It is not without cost though, and in an insolvent estate, the executor is usually left footing the bill for this Court process to get themselves released from any liability in connection with the estate and its creditors at the end of the day.
This is provided as information ONLY; it should NOT be construed as legal advice. You should consult with a lawyer to provide you with specific advice for your own situation. For more information on estate planning and to discuss your specific circumstances, please contact Vanessa DeDominicis on 250-869-1140 or email@example.com. Vanessa practices in the area of Wills/ Estates and Real Estate at Pushor Mitchell LLP in Kelowna and would be more than happy to assist you.