When someone dies, it’s rarely just the grief that families are left to deal with. There’s a practical side too, and for whoever has been named as executor, that often means untangling exactly what the deceased owed before anything can be handed out to beneficiaries. It’s a question we’re asked constantly at Family Lawyers Glasgow: can I just pay everyone their share, or do the debts have to be sorted first? The short answer is that in almost every case, the debts and liabilities of the estate must be paid before the estate can be distributed – and getting the order wrong can leave an executor personally liable. This article walks through what that actually means in practice, which debts take priority, and where the Complete Clarity Solicitors Family Law Team can help if it all starts to feel like too much to manage on your own. If you’re currently dealing with a loved one’s estate and feeling out of your depth, please do get in touch – a short conversation with a solicitor is often enough to bring some clarity to a confusing time.
Why Debts Have to Be Settled Before Beneficiaries Are Paid
This surprises a lot of people, understandably. You’d think that once someone has died, their debts might simply disappear along with them. They don’t. In Scotland, a person’s debts become obligations of their estate, and the executor is legally responsible for making sure those debts are paid before any inheritance is distributed to beneficiaries. This is one of the core executor duties, and it isn’t optional.
The reasoning is fairly straightforward once you think it through: creditors have a legal right to be repaid from the estate, and that right takes priority over a beneficiary’s expectation of inheritance. If an executor distributes the estate to beneficiaries before settling outstanding debts, and it later turns out there wasn’t enough left to cover what was owed, the executor can be held personally liable for the shortfall. That’s a genuinely stressful position to be in, and it’s one of the main reasons we always encourage people to seek legal advice before making payments from the estate, particularly with a large estate or one where the full picture of debts isn’t yet clear.
There’s also a timing element that catches people out. An executor cannot simply distribute the estate the moment probate – or, in Scotland, confirmation – is granted. There’s a period during which creditors can still come forward, and a prudent executor will wait a reasonable time from the date of death before distributing, precisely so that debts aren’t overlooked.
What Counts as a Debt or Liability of the Estate?
Debts and liabilities can take a surprising number of forms, and in many cases the executor doesn’t discover all of them straight away. The obvious ones are things like credit card balances, personal loans, utility bills, and any outstanding tax owed to HMRC. But funeral costs, care home fees, and even certain household bills that were still accruing at the date of death all count too.
Then there are secured debts, most commonly a mortgage on the family home. These are treated a little differently from unsecured debts because the creditor has a specific claim against a particular asset – the property – rather than a general claim against the estate as a whole. This matters when working out the order of priority, which we’ll come to shortly.
It’s also worth flagging inheritance tax here, because it often gets overlooked until quite late in the process. Depending on the value of the estate, inheritance tax may need to be paid, and in many cases some or all of it must be paid within a set period, even before the full estate has been administered. This is one of the areas where getting legal advice early genuinely saves money and stress later on.
Confirmation: The Scottish Equivalent of Probate
If you’ve read anything about this process in an English context, you’ll have come across the term “grant of probate.” In Scotland, the equivalent is confirmation, and it’s issued by the local Sheriff Court rather than through the process used elsewhere in the UK. To apply for confirmation, the executor typically needs a copy of the death certificate, a reasonably complete inventory of the estate’s assets and debts, and – for anything beyond a small estate – often the input of a solicitor to make sure the application is accurate.
Confirmation gives the executor legal authority to deal with the deceased’s assets: closing bank accounts, selling or transferring property, and, crucially, accessing estate funds to pay outstanding debts. Without it, banks and other institutions generally won’t release funds, which is why this step tends to come right at the start of estate administration in Scotland.
The Scottish Courts and Tribunals Service handles the practical side of confirmation, though it’s worth knowing that the Scottish Courts and Tribunals Service cannot give legal advice on how to value the estate or resolve disputes between beneficiaries – that’s where a solicitor’s guidance becomes genuinely valuable, especially if the estate is even slightly complicated.
What Order Are Debts Paid In By The Executor?
This is where things can get genuinely tricky, and it’s an area where we’d always recommend getting legal advice rather than guessing. Scots law sets out a broad order of priority for how debts must be paid, and getting it wrong isn’t just a technical slip – it can expose the executor to personal liability.
Broadly speaking, funeral expenses and the costs of administering the estate – solicitor’s fees, valuation costs, and so on – tend to be dealt with first. Secured debts, like a mortgage, are usually paid from the sale or transfer of the specific asset they’re attached to. Unsecured debts, such as credit cards and personal loans, generally rank below secured debts but above the interests of beneficiaries. Inheritance tax sits within this hierarchy too, and its position can shift depending on the size and nature of the estate.
For most people dealing with a fairly modest, straightforward estate, this process is manageable without too much difficulty, particularly with a small estate where there are few or no complications. But for a large estate, or one where the debts and liabilities are unclear, disputed, or exceed the assets available, this is genuinely not a process to navigate alone.
What Happens If the Estate Is Insolvent?
Sometimes the value of the estate simply isn’t enough to cover everything the deceased owed. When this happens, the estate is considered insolvent, and different rules apply. An insolvent estate doesn’t mean beneficiaries are personally chased for the shortfall – inheritance in Scotland doesn’t work that way – but it does mean creditors are paid according to a strict order of priority, and beneficiaries may receive little or nothing at all.
If you suspect the estate you’re dealing with might be insolvent, this is one of those moments where legal advice isn’t just helpful, it’s essential. An executor who continues to distribute funds without properly establishing whether the estate is insolvent risks serious personal exposure. The Complete Clarity Solicitors Family Law Team has supported many families through exactly this kind of situation, and while it can feel daunting at first, there is a clear, structured way through it.
Frequently Asked Questions
Does the executor have to pay debts out of their own pocket? No, not if the process is followed correctly. Debts are paid from the estate’s own funds and assets. The risk of personal liability only arises when debts are missed or the estate is distributed too early.
How long does an executor have to identify all the debts? There’s no single fixed deadline in the way some people assume, but an executor must identify and notify relevant creditors and HMRC of the death reasonably promptly, and should generally wait a sensible period after the date of death before distributing, to give creditors a fair chance to come forward.
Can beneficiaries be asked to pay back money if a debt turns up later? In some circumstances, yes, particularly if the estate was distributed too early. This is precisely why executors are advised to administer the estate carefully and seek legal advice before making payments.
Getting Help And Legal Advice When Dealing With an Estate, Inheritance Tax, Or Debts and Liabilities
Administering an estate while grieving is a lot to carry, and it’s completely understandable if the legal side feels overwhelming right now. This is exactly the kind of situation the team at Family Lawyers Glasgow was built to help with – guiding executors through confirmation, identifying debts and liabilities, and making sure the estate is distributed correctly and fairly. If you’re currently facing the responsibility of executor duties for the first time, or simply want a second opinion before signing anything off, we’d encourage you to speak to a solicitor early rather than later. It won’t cost you anything to have that first conversation, and it might save a great deal of stress down the line. The Complete Clarity Solicitors Family Law Team is here to guide you through the process, whenever you’re ready.
