Dealing with an insolvent deceased estate is never easy, but with proper information and planning, the decision can be a made a little bit easier.
Once an estate is declared bankrupt it follows a similar path to that of a living bankrupt.
For a deceased person’s estate to become bankrupt, this can occur by two methods, either:
Voluntarily through the executor of the deceased estate applying to court, or
By a creditor applying to bankrupt the deceased.
Making a deceased estate bankrupt
Just like with living people, if a person dies while insolvent, or unable to pay their debts owed, their deceased estate can be declared bankrupt.
An application for bankrupting a deceased estate may be made in the Federal Court or the Federal Circuit Court.
The Act provides for the administrator of a deceased’s estate or for a creditor or a group of creditors owed at least $5,000 to apply to the court for the administration of a deceased person’s estate.
An administrator could apply if the deceased estate was insolvent and the provisions of the deceased’s will, if there is one, could not be given effect to.
The advantages for an Executor in proceeding with an administration of a Deceased Estate under Part XI of the Act is that the executor is not personally liable for any alleged misappropriation; breach of trust or maladministration of the deceased estate.