Debt does not die with you. When someone dies, their outstanding debts become the responsibility of their estate, and the executor or administrator must deal with them before distributing anything to beneficiaries. This guide explains how that process works, what protections exist for executors, and what happens to jointly owned property when debts remain unpaid.
The executor’s duty
An executor (named in a will) or administrator (appointed where there is no valid will) carries a legal duty to settle all outstanding debts from the estate before passing anything on to beneficiaries. Crucially, unless the administrator co-signed a loan or provided a personal guarantee, they are not personally responsible for the debts of the person who died. Their liability arises only if they distribute the estate incorrectly.
If an executor pays out to beneficiaries and a creditor later comes forward, that executor may face a personal claim. Getting the process right from the start matters enormously.
Debts are paid from the estate
Before any distribution can happen, the executor must establish the full value of the estate’s assets and its liabilities. In most cases that means first obtaining a grant of probate, or letters of administration where there is no will, because banks and other institutions will not release funds without it.
There is no single estate value above which probate becomes compulsory. Every bank, building society and provider sets its own limit for releasing funds without a grant, those limits are not published centrally and they vary widely, so ask each one. Conversely a grant can be needed regardless of value, most obviously where the estate includes land or a share of land held as tenants in common.
The order debts are paid in, and why it matters
This is where executors get into genuine trouble, and the rule is not the one most people assume.
If the estate is solvent, meaning the assets comfortably cover everything owed, there is no competition between creditors at all. Every creditor is paid in full, so no one ranks ahead of anyone else. What the Administration of Estates Act 1925 sets out for a solvent estate is the order in which the estate’s assets are applied to meet the debts, which matters to the beneficiaries because it determines whose gift is reduced, not to the creditors.
If the estate is insolvent, a statutory order does apply, and it is not “secured debts first, then HMRC, then everyone else”. Secured creditors stand outside the order and look to their security. Beyond that, reasonable funeral, testamentary and administration expenses come first, then preferential debts, then ordinary unsecured debts.
HMRC has no general priority. Since December 2020 it ranks as a secondary preferential creditor only for taxes the deceased held on behalf of others, such as VAT and PAYE deducted from employees. The deceased’s own income tax is an ordinary unsecured debt, ranking equally with the utility bills, the bank loan and the credit cards, not ahead of them.
Pay the wrong creditor first in an insolvent estate and you become personally liable to the creditor who lost out. If there is any doubt at all that the estate can meet everything owed, take advice before paying anyone.
Only once all liabilities are settled can the remaining balance pass to the beneficiaries under the will or, where there is no will, under the intestacy rules.
Advertising for unknown creditors
One of the most effective steps an executor can take is placing a notice under section 27 of the Trustee Act 1925 in The Gazette. This is a statutory advertisement inviting any creditor with a claim against the estate to come forward.
A second notice is required where the estate includes land, in a newspaper circulating in the district where that land is situated. It is the location of the property that decides which paper, not where the deceased lived. Where there is no land, The Gazette notice alone satisfies the section.
The statutory minimum period is two months. You will often see “two months and one day” quoted: that is a publishing convention rather than a requirement of the Act, and it does no harm.
What section 27 actually protects you from
The protection is real but narrower than most summaries suggest, and it is worth understanding its limits before you rely on it.
What it does: once the period has expired, you may distribute without being personally liable to creditors of whom you had no notice. A creditor who surfaces afterwards can still follow the assets into the hands of the beneficiaries; they simply cannot come after you.
What it does not do:
- The test is notice, not discoverability. If you knew or had been told about a debt, the notice gives you no protection against it, however long you wait.
- It does not remove your duty to search. Section 27 expressly preserves the obligation to make the searches a prospective purchaser would be advised to make, so you are still expected to go through the paperwork and check the obvious sources.
- It gives no protection against a claim under the Inheritance (Provision for Family and Dependants) Act 1975. That is a separate clock, and it is the one that catches executors out.
- It gives no protection against tax on income arising after the death.
The two-month notice is not the only period to wait out
This is the single most common mistake. Executors place a Gazette notice, wait two months, hear nothing and distribute, and believe they are safe. They are not.
Someone who was financially dependent on the deceased, or who falls into one of the other eligible categories, can bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 if the will or the intestacy rules fail to make reasonable financial provision for them. A personal representative who distributes once six months have passed from the date of the grant is protected from personal liability for such a claim. Distribute at the two-month mark and you remain personally exposed for another four months.
Separately, under section 44 of the Administration of Estates Act 1925, you cannot be compelled to distribute before a year has passed from the date of death. That “executor’s year” is a protection for you, not a deadline you are breaching.
Jointly owned property and debt
Where the deceased owned property with a partner or another person, the type of ownership affects how debts are handled.
Tenants in common means each person owned a defined share of the property. The deceased’s share forms part of the estate. If there are insufficient funds elsewhere to cover the debts, that share may need to be sold. To avoid a sale, the surviving co-owner would need to reach an agreement with the estate, usually by buying out the deceased’s share at its market value, which they may need to fund from savings or by remortgaging.
Joint tenants means the property passed automatically to the surviving owner by the right of survivorship on death. That share never forms part of the estate. However, this does not necessarily put the property beyond creditors’ reach entirely.
Under section 421A of the Insolvency Act 1986, where an insolvency administration order (an order for the administration in bankruptcy of an insolvent estate) has been made, a trustee in bankruptcy may apply to the court for an order requiring the surviving owner to pay a sum not exceeding the value of the interest that was lost to the estate. The court may make such an order where the petition was presented within five years of the date of death, and it must have regard to all the circumstances, assuming unless the circumstances are exceptional that the interests of creditors outweigh other considerations. Where a survivor finds themselves in this position, engaging with the trustee in bankruptcy early, with legal advice, generally produces a better outcome than waiting for an application to be made.
Different types of debt
Mortgages and secured loans
A secured creditor looks to its security rather than queuing with everyone else, so a mortgage lender’s position is not affected by whatever else the estate owes. Check whether there was a life or mortgage protection policy: lenders require buildings insurance as a condition of the loan, but life cover is usually recommended rather than required, so its existence cannot be assumed either way. Where no policy pays the mortgage off, the property will usually need to be sold, and any further loans secured against it are repaid from the proceeds in order of priority.
Under section 35 of the Administration of Estates Act 1925, a charged property is primarily liable for its own secured debt unless the will says otherwise. A beneficiary left “the house” may therefore inherit it with the mortgage attached rather than paid off from the rest of the estate, which is a frequent source of surprise and occasionally of dispute.
Unsecured debts
Unsecured debts include income tax and other amounts owed to HMRC, utility bills, bank loans and credit cards. In a solvent estate they are simply all paid. In an insolvent one they rank equally with each other after expenses and preferential debts, and are paid proportionately.
Joint debts behave differently from sole debts. Where the deceased held a joint credit card, joint loan or joint tenancy agreement, liability is usually joint and several, which means the survivor can be pursued for the whole balance rather than half of it. That includes rent arrears on a joint tenancy of rented accommodation: the surviving tenant is liable for the full amount because of the tenancy agreement they signed, which is a different matter entirely from the survivorship rule that applies to jointly owned freehold property. Check the credit agreement in each case rather than assuming.
If the deceased’s bank account was in their sole name, it will be frozen from the moment the bank is told of the death. It is unfrozen once you produce the grant, or earlier if the balance falls within the bank’s own limit for releasing funds without one. That happens at the start of the administration, not the end, which is just as well, because the estate’s debts are usually paid from it.
Costs and expenses of the estate
Before calculating what is available to cover debts, executors must also account for estate expenses. Funeral costs are payable from the estate where no prepaid plan exists. Solicitor fees, estate agent costs and other administration expenses also rank ahead of general beneficiaries.
Getting the right probate advice
Some executors choose to act without a solicitor, but debt within an estate adds real complexity. The order of priority, the risks of personal liability, and the rules around joint ownership all require careful attention, and the point at which an estate might be insolvent is the point at which doing it yourself stops being sensible.
A probate specialist will not remove your responsibility, but they will substantially reduce the risk of the errors that create personal liability. Our guide to what happens once probate has been granted sets out the full sequence, and how much solicitors charge for probate will help you weigh up the cost.
Frequently asked questions
Do debts die with you in the UK?
No. Debts do not die when someone dies. They become liabilities of the estate and must be settled from the estate’s assets before anything is distributed to beneficiaries.
Can an executor be personally liable for the deceased’s debts?
Yes, in certain circumstances. Three in particular. Distributing the estate before all known debts are paid exposes you to a claim from the creditor who lost out. Paying creditors in the wrong order in an insolvent estate does the same. And distributing before six months have passed from the date of the grant leaves you personally exposed to a claim under the Inheritance (Provision for Family and Dependants) Act 1975. Placing a section 27 Trustee Act notice and carrying out proper searches protects you against creditors you had no notice of, but not against any of the three situations above.
What happens if the estate cannot pay all the debts?
If an estate’s liabilities exceed its assets, the estate is insolvent. The personal representative must then administer it for the benefit of creditors rather than beneficiaries, following the rules in the Administration of Insolvent Estates of Deceased Persons Order 1986. Reasonable funeral, testamentary and administration expenses come first, then preferential debts, then ordinary unsecured debts paid proportionately; secured creditors stand outside that order and look to their security. Beneficiaries receive nothing. An insolvency administration order can be sought from the court where the position is contentious or complex. Paying out of order makes you personally liable to the creditor prejudiced, so take advice as soon as insolvency looks possible rather than once it is confirmed.
How long should an executor wait before distributing the estate?
Six months from the date of the grant is the cautious answer, and it is the one most solicitors give. The two-month Gazette notice protects you against unknown creditors; the six months from the grant is what protects you against a claim under the Inheritance (Provision for Family and Dependants) Act 1975. You also cannot be compelled to distribute within a year of the death, so there is no pressure to move faster than you are comfortable with. Where a claim looks likely, wait longer and take advice.
Are jointly owned debts automatically passed to the surviving partner?
It depends on the type of debt. Joint financial products such as a joint mortgage, joint loan or joint credit card typically pass to the surviving account holder. Sole debts, however, remain the liability of the estate alone. Where the estate cannot meet those sole debts, creditors may in some circumstances pursue claims relating to jointly owned property, particularly where a joint tenancy applied.
This article is for general guidance only and does not constitute legal, tax or financial advice. Rules and thresholds can change and every estate is different. For advice on your own circumstances, speak to a qualified professional. You can book a free legal consultation through The Probate Network.
