WINDING-UP THE SOLVENT ESTATE

Payment of debts – un­secured creditors

1. The Will may direct the order in which assets are to be applied for the payment of debts. See 4 below.

2. In the absence of any such direction the order for payment in Administration of Estates Act 1925, Schedule 1, Part II applies

(1)  property undisposed of by the Will (this includes a lapsed share of residue) subject to retention of a fund to meet any pecuniary legacies “pecuniary legacy” includes annuity, general legacy, demonstrative legacy so far as it is not discharged out of designated property and any general direction for payment of money such as a gift free of I.H.T.

(2)     property comprised in a residuary gift subject to retention of fund to meet any pecuniary legacies so far as not provided for under (1)

(3)     property specifically given for payment of debts

(4)     property specifically charged with payment of debts

(5)     the pecuniary legacy fund set aside under (1) and (2)

(6)    property specifically devised or bequeathed rateably according to its value

(7)     property appointed under a general power (otherwise than by a general devise or bequest)

3.   Assets not included in statutory order are liable for debts in the last
resort

(a)            property subject to an option given by the Will

(b)            donationes mortis causa

(c)            nominated property.

4.   The statutory order is subject to a contrary intention usually shown by a Will containing

(a)            a common form trust for sale of residue directing payment out of the net proceeds of sale, before division, or

(b)            gifts of residue “subject to” or “after payment of” debts or

(c)            gift of specific proof debts where an additional intention is shown to exonerate other property,
e.g. residue.