Estate Debts & Probate UK: Executor's Duties Guide

Overview

When someone dies, their debts don't simply disappear. Mortgages, credit cards, utility arrears, income tax, and any other money owed become liabilities of the estate, and it falls to the executor (or administrator, where there is no will) to settle them before any inheritance is passed on to beneficiaries.

The estate pays what it owes out of its assets. If the estate holds enough to cover everything, the process is usually straightforward. If it doesn't, the estate is insolvent, and a strict statutory order governs which creditors get paid first.

Executors who skip this order, or who distribute money to beneficiaries before all debts are cleared, can end up personally liable for the shortfall. Executors also need to consider inheritance tax, outstanding income tax, and any capital gains owing at the date of death.

Getting a clear picture of what's owed, and to whom, is the foundation of every other decision you'll make during probate.

Key steps

1. Build a complete picture of the estate's finances. Before you pay anyone, list out every asset (property, bank accounts, investments, pensions, personal possessions) alongside every known debt. This snapshot tells you whether the estate is solvent. If liabilities look like they might exceed assets, pause and get proper guidance before making any payments, because the rules change significantly for insolvent estates.
2. Protect yourself by advertising for creditors. Executors can place a statutory notice under section 27 of the Trustee Act 1925 in The Gazette and in a newspaper local to where the deceased owned property. The notice invites unknown creditors to come forward within a set period. If you follow the process correctly and wait the required time, you're generally shielded from personal liability for claims you didn't know about.
3. Settle debts in the correct order. Funeral expenses and testamentary costs typically come first, followed by secured debts, preferential debts, and then unsecured debts such as credit cards and personal loans. In a solvent estate this order matters less, but in an insolvent estate it's critical. Paying a lower-priority creditor ahead of a higher-priority one can leave you personally responsible for the difference.
4. Deal with HMRC. Inheritance tax may be payable and is often due before the grant of probate is issued. You'll also need to finalise income tax up to the date of death and handle any tax arising during the administration period. Keep records of everything you pay and every decision you make. HMRC can ask questions months or even years later.
5. Distribute what remains to the beneficiaries. Only once debts, taxes, and expenses have been fully settled should you start distributing the estate to those named in the will (or entitled under the intestacy rules). Prepare estate accounts showing what came in, what went out, and what each beneficiary is receiving. Getting signed receipts from beneficiaries closes the loop and gives you a clean record.

Common questions