Dealing With the Debts of an Estate

Who is responsible for a deceased person's debts?

The estate pays, through the personal representative. An executor named in the will, or an administrator where there is no will, must collect the assets, settle valid debts, and distribute the remainder to those entitled (gov.uk, as at July 2026, subject to change). Relatives are not generally liable from their own money, though a debt held jointly or under a guarantee can survive against the co-borrower or guarantor.

What counts as a debt of the estate?

An estate debt is any liability the person owed at death, plus certain costs of dealing with the death itself. That can include a mortgage, credit cards, loans, utility and care arrears, and any tax due. Reasonable funeral costs and the expenses of administering the estate also rank as liabilities settled before beneficiaries receive anything (gov.uk, deceased insolvents guidance, as at July 2026, subject to change).

Secured debts. A mortgage or secured loan attached to a specific property.

Funeral and administration costs. Reasonable funeral, testamentary and administration expenses.

Tax. Any income tax, capital gains tax or inheritance tax due from the estate.

Unsecured debts. Credit cards, personal loans, overdrafts and outstanding bills.

The order debts are paid

Debts are not paid first come, first served. Where an estate can meet everything, the order matters less, because all valid debts get paid and the balance passes to beneficiaries. Where money is tight, a set order applies. Secured creditors look first to their security, then reasonable funeral, testamentary and administration expenses rank as pre-preferential, followed by preferential debts, and ordinary unsecured debts come last (gov.uk, deceased insolvents guidance, as at July 2026, subject to change).

Getting this wrong carries real risk. A personal representative who pays a lower-ranking creditor and leaves nothing for a higher-ranking one can, in some cases, become personally answerable for the shortfall, which is one reason many take advice on an estate that looks tight.

See our note on valuing an estate for working out whether the assets cover the debts in the first place.

What happens if the estate cannot pay everything?

An estate is insolvent where its debts exceed its assets. When that happens, the personal representative should generally stop, take stock, and not pay beneficiaries, because creditors rank ahead of anyone inheriting. The debts are paid in the statutory order until the money runs out, and debts left unpaid are usually written off rather than passing to relatives (gov.uk, deceased insolvents guidance, as at July 2026, subject to change). Administering an insolvent estate follows special rules, so it is one situation where many people take professional advice early.

Rank	Type of claim (insolvent estate)
Outside the order	Secured creditors, from their security
1 (pre-preferential)	Reasonable funeral, testamentary and administration expenses
2	Preferential debts
3	Ordinary unsecured debts

Rank

Type of claim (insolvent estate)

Outside the order

Secured creditors, from their security

1 (pre-preferential)

Reasonable funeral, testamentary and administration expenses

Preferential debts

Ordinary unsecured debts

Source: gov.uk, deceased insolvents guidance, reflecting the Administration of Insolvent Estates of Deceased Persons Order 1986 (legislation.gov.uk), as at July 2026, subject to change. The full order in bankruptcy has further categories.

A worked example (illustration only). A man dies owning a home worth £250,000 with a £180,000 mortgage, plus £6,000 in savings. He leaves £4,000 of credit-card debt and an unpaid £3,000 funeral bill. The mortgage lender is a secured creditor met from the property, leaving around £70,000 of equity plus the £6,000 cash. From that, the reasonable funeral cost is a pre-preferential expense settled ahead of the unsecured credit-card balance, which is then paid, before anything passes to the beneficiaries (gov.uk, as at July 2026, subject to change). Change the equity, the debts or the order and the outcome changes, so this is general information rather than a calculation for any real estate.

Do debts affect probate and inheritance tax?

Yes, debts reduce the taxable estate and can affect whether a grant of probate is even needed. Mortgages, loans and other liabilities owed at death are deducted before inheritance tax is worked out, and transfers to a spouse or civil partner are generally exempt (gov.uk, inheritance tax, as at July 2026, subject to change). Where a grant is required, the probate application fee in England and Wales is £300 if the estate is worth more than £5,000, with no fee where the estate is £5,000 or less, and £16 for each extra copy of the grant (gov.uk, probate fees, as at July 2026, subject to change).

Protecting a personal representative from unknown debts

A personal representative can reduce the risk of a creditor emerging after distribution by advertising for claims. Section 27 of the Trustee Act 1925 lets them give notice, fixing a period of not less than two months, and once it has passed they may distribute without personal liability for claims of which they had no notice (legislation.gov.uk, Trustee Act 1925 s.27, as at July 2026, subject to change). The notice is placed in The Gazette, the official public record, and, where the estate includes land, in a local newspaper (The Gazette, deceased estates notices, as at July 2026, subject to change). This does not erase the debt itself, and known creditors must still be paid.

Estate debts in Scotland and Northern Ireland

This guide describes the law of England and Wales. In Scotland the process differs: an estate is administered through confirmation rather than a grant of probate, and Scots succession law has its own rules, including legal rights for a spouse and children. The protective creditor advertisement operates differently too. Northern Ireland has a broadly similar system to England and Wales, with its own equivalent of the section 27 protection under the Trustee Act (Northern Ireland) 1958. Where an estate touches more than one UK nation, it can be worth taking advice in each.

Frequently asked questions

Are family members responsible for a deceased person's debts?

Usually not from their own money. Debts are paid out of the estate by the personal representative, and relatives are not generally liable unless they held the debt jointly or acted as guarantor (gov.uk, as at July 2026, subject to change). A jointly owed loan or a guaranteed obligation can survive against the co-borrower, so the answer depends on how each debt was set up.

What is the order for paying the debts of an estate?

Where an estate is insolvent, secured creditors look to their security first, then reasonable funeral, testamentary and administration expenses rank as pre-preferential, followed by preferential debts, and ordinary unsecured debts last (gov.uk, as at July 2026, subject to change). Where the estate can pay everything, all valid debts are settled before beneficiaries receive their share.

What happens to debt when there is not enough in the estate?

An estate that cannot cover its debts is insolvent. The personal representative should generally not pay beneficiaries, and instead settle debts in the statutory order until funds run out; unpaid debts are usually written off rather than passing to relatives (gov.uk, as at July 2026, subject to change). Insolvent estates follow special rules, so many people take advice early.

Can an executor be personally liable for estate debts?

It can happen if an executor distributes the estate or pays debts in the wrong order and leaves a valid creditor unpaid. Advertising for claims under section 27 of the Trustee Act 1925, with a notice period of at least two months, can reduce personal liability for debts the executor had no notice of (legislation.gov.uk, as at July 2026, subject to change). Careful records and, where needed, professional advice both help.

Are debts paid before or after inheritance tax?

Debts owed at death, such as a mortgage or loans, are deducted when working out the value of the estate for inheritance tax, so they reduce any tax due, and transfers to a spouse or civil partner are generally exempt (gov.uk, as at July 2026, subject to change). In practice, valid debts and any tax are both settled from the estate before beneficiaries inherit, depending on the circumstances.

Does the mortgage have to be repaid when someone dies?

A mortgage does not disappear on death; the lender is a secured creditor and looks to the property. The debt may be repaid from the estate, cleared by a life policy if one was in place, or the property sold, depending on the arrangements. Where a home passes to a spouse who takes on the mortgage, the position differs, so it can be worth discussing with a qualified professional.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

Dealing With the Debts of a Deceased Estate