The prospect of paying thousands of pounds in solicitor’s fees is obviously a massive deterrent for executors when faced with the administration of an estate. For executors who need professional assistance looking into the costs involved can be extremely stressful and, in some cases, they can be made to feel helpless when faced with fees that they personally are not able to pay. It is often misunderstood who is responsible for paying the solicitor and this misunderstanding can cause the executors unnecessary stress thinking they can’t afford the help.
Solicitor’s fees are considered almost like a debt on the estate and therefore it is the estate itself that is responsible for paying the solicitor and any other fees related to its administration, this can also include the probate application fee, executor’s expenses or any expenses paid in order to benefit the estate. In most circumstances, these types of costs are paid directly by the estate or by an executor or beneficiary who is then reimbursed by the estate once there are available assets.
However, there are a few exceptions to this rule, the first being when there are assets in an estate that could be used to produce income but the executors or beneficiaries choose not to liquidise these assets, resulting in liquid assets not being available to pay the solicitors fees. If there are assets available but the executors /beneficiaries (depending on who is stopping the funds becoming available) do not want to use these assets, then they become responsible for paying the solicitor fees.
An example of this scenario is when the majority of the estate’s value is not in savings but in property, shares or in investment portfolios. If the executor/beneficiaries do not want to sell these assets but transfer them instead they must find another way of paying the expenses that can now not be paid by the estate.
The second scenario is when the deceased had more debt than the value of the assets they owned. This means that their estate is insolvent and is not capable of paying back all of what is owed to creditors. This makes it slightly more complicated to determine who is responsible for paying the solicitor.
If there is more debt than the value of the assets, it may still be possible for solicitor’s fees to be paid from the Estate. This is due to there being an order of priority in which debts are paid. Estate and solicitor’s fees are counted as Testamentary expenses and take priority over some other types of debts, this means that even if an estate is insolvent, it is still possible, depending on the types of debt and their value, for the estate to fund its own administration costs.
The order in which creditors of an estate should be paid is:
- Secured creditors– this is a creditor that has lent money against specified assets; this tends to be a bank. A mortgage against property is classified as a secured debt as the bank can recover the owed amount from the property itself by forcing a sale or repossession, another example would be a car bought on finance.
- The funeral expenses – the first priority after a secured creditor is funeral expenses, these are the only type of expenses that can be paid directly out of the deceased’s frozen bank account.
- Testamentary expenses – This includes solicitor expenses and other expenses that relate to the administration of the estate.
- Preferred debts and Preferential debts – these are very rare and will not apply in most cases. This can refer to wages or money owed to employees. For example, if there is money owed to a carer they were employing.
- Unsecured creditors –This is a creditor that has lent money without obtaining a specified assets as collateral. An example of this kind of debt is bank loans, credit and store cards but can also include utility bills and debts to the local and central government.
- Interest due on unsecured debts. – this is interest that has accrued on a unpaid unsecured debt.
- Deferred debts– This is debt made in a somewhat informal way, for example a loan made between family members.
When an estate has debt, the creditors must be paid in this order. Once all of the secured creditors have been repaid, there is still some funds left they would be used to pay the funeral expenses, then the solicitor’s expenses and so on, continuing down the list until all the debts on the estate have been repaid. After which the remaining estate would be distributed to the beneficiaries according to the wishes in the will or the laws of intestacy.
It may be that the estate has enough assets to cover secured creditors, funeral expenses, and solicitor’s costs but after these have been accounted for there is not enough to pay creditors of a lower priority. For example, if an estate is valued at £6000 and has an unsecured loan but the solicitor’s fees and funeral expenses equal £6,000, the solicitor’s fees and funeral expenses would take priority over the unsecured loan and be paid first. After which there would be no money left in the estate to pay the unsecured creditor so they would have to write off the remaining debt. If the executor is aware that after paying the debts that have priority over Testamentary expense (secured creditors and funeral expenses) there will be nothing left in the estate but choose to use a solicitor, it is the executor who is responsible for paying the solicitor fees as they engaged the solicitor’s services even though the estate was unable to fund the expense.