Debts When Someone Dies
When someone dies, their debts do not simply disappear. In England and Wales, the estate is responsible for settling all outstanding liabilities — in a strict order of priority — before a single penny can be distributed to beneficiaries.
6 months
IHT payment deadline from month of death
£325,000
Standard IHT nil-rate band threshold
5 tiers
Strict order of debt priority in probate
2 months
Statutory notice period to protect executors
The fundamental rule: debts before distributions
In England and Wales, an executor has a legal duty to pay all debts of the estate before distributing anything to beneficiaries. This is not optional. An executor who distributes assets to beneficiaries before settling debts can be held personally liable to creditors for the shortfall — even if the executor acted in good faith.
Common Debts
What Debts Does the Estate Have to Pay?
Almost any financial obligation the deceased had during their lifetime becomes a debt of the estate. Here are the most common types executors encounter.
Mortgage
Secured debtA mortgage does not die with the borrower. The outstanding balance becomes a debt of the estate. If the property is to be transferred to a beneficiary, they must either take over the mortgage (subject to lender consent) or the estate must redeem it. If the property is sold during probate, the mortgage is repaid from the proceeds.
Credit cards & personal loans
Unsecured debtUnsecured debts — credit cards, personal loans, overdrafts — are debts of the estate, not of the beneficiaries. Family members are not personally liable for a deceased person's unsecured debts unless they were a joint account holder or guarantor. The executor pays these from estate funds after secured debts.
HMRC — income tax & CGT
Tax debtThe executor must notify HMRC of the death and settle any outstanding income tax for the year of death. If the estate sells assets (including property) that have increased in value since the date of death, Capital Gains Tax may arise on that uplift. HMRC must be paid before beneficiaries receive anything.
Inheritance tax
Tax debtInheritance Tax (IHT) is due within six months of the end of the month of death — often before probate is granted. The executor must pay IHT from estate funds (or arrange an instalment plan for property) before the Grant of Probate is issued. Failure to pay on time results in interest charges.
Utility bills & council tax
Ongoing costsOngoing utility bills and council tax continue to accrue until the property is sold or transferred. These are debts of the estate and must be paid by the executor from estate funds. Councils and utility providers should be notified of the death promptly.
Care home fees
Care debtIf the deceased was in residential care, any outstanding care home fees are a debt of the estate. Local authorities may also seek to recover care costs they funded during the deceased's lifetime — a process known as a deferred payment agreement recovery.
Order of Priority
Which Debts Are Paid First?
The law in England and Wales sets out a strict order in which debts must be paid from the estate. This order applies whether or not there is a will.
Funeral expenses
Reasonable funeral costs are paid first from the estate — before any other debts or legacies.
Secured debts (mortgage)
Mortgages and other secured loans are tied to specific assets. The asset must be sold or the debt redeemed before the asset can be transferred.
HMRC — tax debts
Income tax, capital gains tax, and any outstanding HMRC liabilities must be settled. HMRC is a preferential creditor in insolvent estates.
Unsecured debts
Credit cards, personal loans, utility arrears, and other unsecured debts are paid after secured debts and HMRC, in proportion if the estate is insufficient.
Legacies and gifts
Only once all debts are settled can the executor distribute the estate to beneficiaries under the will or the intestacy rules.
Insolvent estates: If the estate cannot pay all debts in full, the rules of insolvency apply. Creditors in lower priority tiers may receive nothing, and beneficiaries receive nothing at all. Executors must seek specialist legal advice immediately if insolvency is suspected.
Executor Checklist
What Must an Executor Do About Debts?
Dealing with debts is one of the executor's most important — and legally sensitive — responsibilities. Follow these steps to protect yourself and the estate.
Identify all debts
Search through bank statements, correspondence, and credit files. Place a statutory notice in The Gazette and a local newspaper to invite creditors to come forward — this protects the executor from personal liability if an unknown creditor appears later.
Notify creditors
Write to all known creditors to inform them of the death. Mortgage lenders, credit card companies, HMRC, the local council, and utility providers should all be contacted. Most will freeze interest and charges on notification.
Value the estate
Obtain formal valuations of all assets — property, investments, savings, personal possessions. This is required for the IHT return (IHT400 or IHT205) and to establish whether the estate is solvent.
Apply for the Grant of Probate
Submit the probate application to HMCTS, together with the IHT return and any IHT payment. The Grant of Probate (or Letters of Administration if there is no will) gives the executor legal authority to deal with the estate.
Collect assets and pay debts
Once the Grant is received, collect all estate assets — close bank accounts, sell investments, and if necessary sell the property. Pay all debts in the correct order of priority before distributing anything to beneficiaries.
Distribute the estate
Only after all debts, taxes, and expenses are settled can the executor distribute the remaining estate to beneficiaries under the will or the intestacy rules. Keep detailed accounts throughout.
Executor Protection
The Statutory Notice: Protecting the Executor
Under section 27 of the Trustee Act 1925, an executor can place a notice in The Gazette (the official public record) and a local newspaper, inviting creditors to submit claims within a specified period — usually two months.
If the executor distributes the estate after the notice period has expired, they are protected from personal liability for any creditor who failed to come forward — provided the executor acted in good faith and had no actual knowledge of the debt.
Without this notice, an executor who distributes the estate and later discovers an unknown creditor can be personally liable for the debt — even if the estate has already been distributed to beneficiaries.
Why the notice matters
- Protects the executor from personal liability for unknown debts
- Gives creditors a fair opportunity to submit claims
- Allows the executor to distribute the estate with confidence
- Required for best practice in all but the simplest estates
- Does not prevent known creditors from being paid — it supplements the process
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FAQs
Frequently Asked Questions
Are family members responsible for a deceased person's debts?
Generally, no. In England and Wales, debts die with the person — family members are not personally liable for a deceased person's debts unless they were a joint account holder, guarantor, or the debt arose from a jointly owned asset such as a mortgage. The estate is responsible for paying debts, not the beneficiaries.
What happens if the estate cannot pay all the debts?
If the estate is insolvent — meaning the debts exceed the assets — the estate is administered under the Insolvency Act 1986 rules. Debts are paid in a strict statutory order of priority. Beneficiaries receive nothing. Executors should seek specialist legal advice immediately if they suspect insolvency, as distributing assets to beneficiaries before paying creditors can make the executor personally liable.
Does a mortgage have to be paid off when someone dies?
Not necessarily immediately. The mortgage becomes a debt of the estate. If the property is to be transferred to a beneficiary, the lender must consent and the beneficiary must qualify for the mortgage. If the property is sold during probate, the mortgage is repaid from the sale proceeds. Some lenders will allow a period of grace while probate is obtained.
What is a statutory notice to creditors?
A statutory notice (also called a Section 27 notice) is an advertisement placed in The Gazette and a local newspaper inviting any creditors of the deceased to come forward within a specified period (usually two months). If an executor distributes the estate without placing this notice and a creditor later appears, the executor can be personally liable. Placing the notice provides a degree of protection.
Can creditors claim against the estate after probate is complete?
Yes, in theory — but placing a statutory notice in The Gazette significantly limits this risk. If the executor has placed the notice, waited the required period, and distributed the estate in good faith, they are generally protected from personal liability for unknown creditors who come forward later. The creditor's claim would be against the beneficiaries who received the assets, not the executor personally.
What happens to a joint mortgage when one person dies?
If the mortgage is held jointly, the surviving borrower becomes solely responsible for the mortgage. The property does not automatically have to be sold. The lender should be notified of the death and will update the mortgage to the survivor's name. If the property was held as joint tenants, it passes to the survivor by the right of survivorship. If held as tenants in common, the deceased's share passes through their estate.
Do credit card debts have to be paid from the estate?
Yes. Credit card debts are unsecured debts of the estate and must be paid before beneficiaries receive anything. However, family members who were not joint account holders are not personally liable. The executor should notify the credit card company of the death, and the company will typically freeze the account and submit a claim against the estate.
What is an insolvent estate?
An insolvent estate is one where the total debts exceed the total assets. In this situation, the estate is administered under insolvency rules — creditors are paid in a strict order of priority, and beneficiaries receive nothing. The executor must not distribute any assets to beneficiaries if they know or suspect the estate is insolvent, as doing so can make them personally liable to creditors.
How long does an executor have to pay debts?
There is no fixed statutory deadline for paying all debts, but executors are expected to administer the estate within a reasonable time — typically 12 months from the date of death (known as the "executor's year"). Inheritance Tax must be paid within six months of the end of the month of death. Delaying unreasonably can expose the executor to claims from beneficiaries or creditors.
Can an executor be personally liable for debts?
Yes, in certain circumstances. If an executor distributes the estate to beneficiaries before paying all debts, they can be personally liable to creditors for the shortfall. This is why placing a statutory notice, identifying all debts, and paying them in the correct order of priority is so important. Specialist probate solicitor advice is strongly recommended.
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