Experts in Wills and Estates

Insolvent Estates (what you should know)

What is an Insolvent Estate?

When an estate has liabilities that exceed the value of its assets, it’s called an insolvent estate.

If you are a beneficiary under a Will where the liabilities of the deceased are more than the assets of the deceased then it is important to be aware of the way in which Insolvent Deceased Estates are dealt with by law.

An Insolvent Deceased Estate will be administered in accordance with rules set out in the Probate and Administration Act of New South Wales.

The purpose of the rules governing Insolvent Estates is to govern the order of payment for creditors of the deceased estate. Under these rules the payment of any funeral, testamentary and administrative expenses of the Deceased Estate are paid first. These priority payments cover the costs of the administrator of the Estate of the deceased person.

If there are any assets available after payment of these expenses then the remainder of the liabilities of the Estate are dealt with in accordance with the rules of priority used in the Bankruptcy Act.

However, certain assets of the deceased are not included in the Insolvent Estate but rather, pass straight to the beneficiaries, including:

  • Life insurance policies of the deceased unless the deceased had entered into a contract expressly requiring the monies under the policy to be used to pay their debts.
  • Superannuation benefits of the deceased.


If you are a beneficiary under an Insolvent Estate you need to seek expert legal advice from a Wills and Estates Lawyer on the effect of the insolvency on your inheritance and ways in which you can safeguard this inheritance. At Heckenberg Lawyers we are involved in every facet of the law governing Wills and Estates and have assisted countless beneficiaries dealing with the disappointment of discovering that their inheritance under a Will may not materialise due to the insolvency of the Estate.

If you are a beneficiary in this position it is in your best interests to obtain independent legal advice on your own behalf to ensure that the information you are being provided with is accurate and to ensure that your interests in the Insolvent Estate are protected. Our expert Wills and Estate Lawyers will explain to you the effect of the Insolvent Estate on your inheritance as well as undertaking and reviewing any material provided by the administrator of the Estate and advising you on your best course of action.

Contact us here.

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