Understanding the differences between a Solvent & Insolvent Estate

Debts also include medical, health, taxes, and administrative expenses. These debts will need to be paid; before paying for these debts, you’ll need to determine whether an estate is solvent or insolvent. When a decedent passes away, the Decedents’ Estate will either be Solvent or Insolvent.

Solvent Estates

When the assets exceed the debts, this creates a solvent estate. For example, a decedent passes away and leaves their home(s), personal property, and investments, totaling two million. Also, there are credit cards, medical, and unpaid bills, which total one hundred thousand dollars. You subtract the assets minus the debts, which creates a surplus of One Million, Nine Hundred Thousand.

Insolvent Estates

When the debts exceed the assets, this creates an insolvent estate. For example, a decedent passes away after a prolonged illness. The costs for long-term care, medical bills, credit cards, and unpaid bills total two hundred thousand dollars, and the assets accumulated to fifty thousand dollars; therefore, this creates an insolvent estate.

What Happens to the Assets?

Once the estate determines which is solvent or insolvent, it’s the responsibility of the administrator or executor of the estate to pay the debts by using the assets from the estate. Consulting with a professional Probate Real Estate Consultant will assist you in providing fair market value and sell it as quickly as possible for the estate’s biggest asset.