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An executor is not automatically liable for the debts of the deceased just because they are the executor.  When you step into the role of the executor of an estate you do not automatically become personally liable for all of the debts of the deceased.

Many creditors (and collection agencies) will attempt to hound an executor into paying their debt by claiming that the executor is liable for the debt.  This is false.

However, see Rule 3 for how an estate trustee can become personally liable if they do not handle the deceased’s debts properly.


The executor is personally liable for all debts that the executor incurs after the death of the deceased.  For instance, if the executor hires movers, accountants, or lawyers to assist with the estate, then the executor is responsible for ensuring that those debts are paid.


An executor is liable for is ensuring that the debts of the deceased are handled properly.  It is the duty of the executor to ensure that all of the creditors of the estate are treated equitably, and if possible, are all paid in full from the estate.

An executor will be liable if one creditor receives more (as a % of their debt) than another creditor.  Also, an executor will be held personally liable if the executor distributes any of the estate to beneficiaries and without first ensuring that all creditors are paid in full.



There is nothing wrong with the deceased leaving a few unpaid bills at death.  However, too much debt can make administering the estate very difficult for a prospective executor.

It is very important for a prospective executor to get a clear picture of the debts and assets of the deceased as quickly as possible and before going any further with the estate. Some estate debts are easily handled, and some are a potential nightmare for the executor so you must be careful.


First, determine how much the debts are and who they are owed to. Sort them into 3 groups – taxes, secured debt (eg. Mortgages) and unsecured debt (for instance, credit cards)

Second, determine what the assets are and how difficult they will be to convert to cash.

Third, determine if it will be possible to pay all of the debts in full (eventually) or not.

If it will be possible to pay all of the debts in full, you may have ‘liquidity’ problems for a while (i.e. not enough cash on hand to pay the debts) but ultimately, you should be able to pay everyone in full after you liquidate the assets.

Estates with liquidity problems can be handled, but they require a strong hand and good professional advice ideally from a lawyer with knowledge of bankruptcy law and creditors’ rights.  Executors without experience or the temperament for debtor/creditor disputes may want to renounce the right to be estate trustee, in favour of  someone else with more experience handling unhappy creditors.

We have a lot of experience with these difficult situations, both as advisor and executor and welcome inquiries.


Some assets of the deceased are exempt from ‘seizure’ and thus can be dealt with by inheritance (either by will or the rules for intestacy if there is no will) even if the estate is bankrupt.  These assets include:

  • A vehicle worth up to a maximum of $6,600
  • All clothing
  • Furniture, equipment, tools, fuel and food to a maximum aggregate value of $13,150
  • Up to $10,000 of equity in a home.

For many insolvent estates these exempt assets are the only assets.

However, it is important to verify that they are truly unencumbered assets of the deceased on death – not leased, and with no specific lien against them (unlikely for clothes, quite possible for vehicles, furniture and equipment).

Subject to payment of reasonable funeral and burial expenses, these exempt assets can usually be distributed to beneficiaries (not creditors) according to the will, or if there is no will, the rules of intestacy.

It is often possible to transfer ownership of an inexpensive vehicle from the estate to a family member without probate, even if there is no will, especially if the family member is the sole beneficiary of the estate (such as the married spouse of an intestate estate with less than $200,000 in assets).


Generally it is acceptable to pay reasonable (or ‘modest’) funeral and burial expenses first, before payment of other creditors.  This includes reimbursing someone who paid these expenses.


It is important to confirm which ‘assets’ are in the estate.  For instance, jointly owned real estate is not an estate asset.

It is very important to verify ‘who gets what’ for pensions and RRSPs:

  • RRSPs and pensions that pass to named beneficiaries pass outside the estate and are not estate assets.
  • While RRSPs and pensions are usually exempt from seizure in bankruptcy when the plan-holder is alive,  if an RRSP or pension does not pass to a designated beneficiary or pay out to a surviving spouse but ‘falls in to the estate’ upon death, then these assets pass in to the estate, are no longer exempt from seizure, and are estate assets available to pay creditors.

If the estate’s debts are greater than the estate’s assets, it will never be possible to pay all of debts in full.  This is the definition of an insolvent or bankrupt  estate.

As a potential executor you of a bankrupt estate must be very careful. In particular, do not pay some creditors and not others. Do not get hounded into paying the creditor who is screaming the loudest.  To avoid personal liability you absolutely must not pay non-tax creditors of an insolvent estate before paying all income taxes.

If the estate is bankrupt (assets less than liabilities) then your best bet is usually the following:

  • do not meddle with the estate or start taking on the role of the executor;
  • consider renouncing any right to be appointed executor.

When the bankrupt estate has assets over and above the exempt assets (discussed above) then it is likely best to renounce the role of estate trustee and assign the estate into bankruptcy with a licensed insolvency professional (bankruptcy trustee).  Insolvency trustees are licensed by the federal government and you should be able to find one in your area.  They have the skills, immunity from liability, and access to the legal remedies necessary to impose a solution on all creditors.

By definition, there will be nothing for the beneficiaries (either by will or under intestacy legislation) of a bankrupt estate beyond the exempt assets.

Once the estate is assigned into bankruptcy, the trustee in bankruptcy will administer the estate, collect the assets, and pay the creditors as much as possible in accordance with their rights.

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