Distribution of Funds

[Thebestthingtowearisasmile]

Uk South East Of England , Hello I am looking for some much needed advice on the strict priority of funds from an executor , and the liablity of this matter my understanding is that secure debts need to be paid first then a benificary last.. Who would be liable for any creditor outstanding if there are aware of this debt and did not pay this or set aside monies for this debt before paying a legacy ..Even if the legacy did not cover the debt outstanding Thank you x

I believe it would be the executor/s.

The order of paying debts is:

• Secured creditors
• Reasonable funeral, administration and testamentary expenses. Testamentary expenses can include things like probate fees and solicitor fees.
• Preferred and preferential debts such as employee wages, if the deceased employed someone
• Unsecured creditors
• Interest due on unsecured loans
• Deferred debt, such as an informal loan between family members

This only comes into play if the estate is insolvent. If the estate is solvent, all debts should be settled in full before the estate is distributed. It does not matter in which order the executor settles the debts.

If the executor is aware of a debt and distributes the estate without paying that debt, they can be held personally liable for the debt. The executor can also be held liable for any debts of which they are unaware at the time they distribute the estate unless they have taken reasonable steps to try to identify all debts by placing notices in The Gazette and the deceased's local paper.

Thank you if the debt is larger then the legacy paid out are they still liable for this debt / as they are saying this still needs to be paid back and estate assets need to be sold to cover this debt ..

The size of the debt and the legacy are irrelevant. The executor cannot force a beneficiary to repay money to the estate. If there is now insufficient money in the estate to cover the debt, the executor may be personally liable.

Can I ask why the the executor MAY be liable if you can explain this for me .. I will advise on my case .. House left to Me and My legacy paid out .. Secured debt has appeared and I have been told to sell it is soon to pay this debt back by executor or find the money .. I can either pay the money back from legacy to reduce this debt or get a loan ect .. This debt was always been made aware to the excecutors just did not know the amount or if it had been dealt with .. Hence this happening to me ... Thank you ..

Sounds like the Executor messed up!
They should not have paid out any legacy until all debts had been paid.
I'm not sure where that leaves you, I suspect your being told to sell to get the exec out of a hole, but you need to get legal advice of your own on this matter.

What is the debt secured on?

Home is has a land registry charge against it any came to light as transfering into my sole name on title deeds / Is it not also the exuctors role to notify and inform all known creditors also ..

I would really like to raise a complaint to the excutors if anyone can help with some advice would help thank you

@Thebestthingtowearisasmile I think this is above the pay grade is commenters on MN!!
You need proper legal advice. Start at your local citizens advice. They can help you and also give you details of local solicitors.

Has the property actually been transferred to you?

No hence issue being raised on land registry thanksx

In which case it sounds like the executor is correct. As you can see from the list in my first post, the secured creditors must be paid first. As there is a loan secured on the house, it must be paid first. If there are insufficient funds to pay it any other way, the house will have to be sold to pay the loan. If there is anything left over from the sale of the house, you will receive that.

Are you saying that the house is not worth enough to cover the debt?

Listen to prh. He knows what he is talking about.

The house isn’t yet yours. The debt will need to be paid out of the proceeds of sale and you will get what is left (if anything)

Thank you but i believe they should not have distibuted funds first in the full awareness of this debt // the funds should have been set aside to go with the debt against this matter .. Thank you ..

They haven't really distributed the funds. The house hasn't been transferred to you.

You really are seeking to benefit from a (potential) error here. You're no worse off than you would have been if you were still simply on hold not knowing whether there would be any money coming your way or not.

As there is a loan secured against the house, you have inherited the equity in the house. That was all the deceased could leave you. The executor could not legally pay off the loan from other assets so that you received the house in full and other beneficiaries got less, which is what you appear to want.

Your choices are to transfer the loan into your name, to take out your own loan or allow the house to be sold. Those are always the choices when someone inherits a house with a loan attached. You have not suffered any loss as a result of the executor's actions.