Insolvency and Death:

Wealth accumulation and protection are important considerations for any person. Insolvencies are an inevitable part of the economy whether you are an entrepreneur, manager or director of a business. In the situation where a person dies before he or she is discharged from bankruptcy, the proceedings in bankruptcy shall, unless the Court otherwise directs, be continued, so far as they are capable of being continued, as if he or she were alive. Therefore it is important to obtain proper legal advice to ensure that your financial affairs are resolved as completely as possible during your lifetime. A Wills and Estates Solicitor may be able to review and consider your situation and provide you preliminary advice on the appropriate strategies and plan for any solvency issues during your lifetime.

The estate of a deceased person is administered under bankruptcy laws and legal advice should be consulted as this process can be highly complex and procedural. The law on bankruptcy makes a distinction between what is divisible property and what is property available for distribution to the creditors of the estate. The categories of different property are slightly different depending upon whether the bankruptcy is deemed to commence before, at the time of, or after the death of the bankrupt. A trustee in bankruptcy is not appointed over the non-divisible assets of the deceased person’s estate. However, if no executor or administrator is yet appointed at the time the trustee is appointed, the trustee may take action to recover, protect and realise any non-divisible assets. The trustee must then account to any executor or administrator later appointed. In doing so, the bankruptcy trustees may claim remuneration and expenses from the deceased estate for work done in taking this action. Irrespective of the size of your wealth, there might be various insolvency risks involved and a Wills and Estates Lawyer may be able to ensure your assets are protected and properly administered.

It is at the option of a creditor or the legal representative of the debtor, as it requires their petition, to bring a deceased estate under the Bankruptcy Act. Death does not protect an insolvent person from bankruptcy. A creditor can petition the Bankruptcy Act for a deceased estate to be sequestrated under the same conditions as apply in normal bankruptcy; in this way the administration of the deceased estate can occur ‘relation back’ is applicable. This means certain transactions before death may be void and reversible. The alternative is to administer the insolvent estate under the State laws governing intestacy. However, the bankruptcy procedure offers potential recovery of assets (from relating back periods) and greater accessibility to the Court for directions as to realisation. Retaining a Wills and Estates Lawyer may be hugely beneficial as you may be able to negotiate and correspond with creditors towards a preferred option.

If you need further legal advice on your insolvency and death related matter, you may book an appointment with us by telephone or by email to info@navado.com.au.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.