If the deceased had more debts than assets, it is necessary to deal with the estate in a different way from a normal administration. In these circumstances:
- the executor, administrator or a creditor of the deceased may file with the Registrar of Probates a declaration that she or he believes the estate to be insolvent. The estate is then administered, so far as the payment of debts is concerned, in the same manner as the estate of a person who is declared bankrupt[ see Administration and Probate Act 1919 (SA) s 60], or
- the estate is administered by the Public Trustee pursuant to s 9 of the Public Trustee Act 1995 (SA) [see Administration and Probate Act 1919 (SA) s 61], or
- the estate may be made bankrupt in the same manner as a living debtor would be, see BANKRUPTCY, Types of bankruptcy. The estate is then administered by the official receiver in bankruptcy. In this case the executor or administrator does not play any part in the administration of the estate.
Sometimes the proceeds of the deceased's life insurance policies are preserved from the bankruptcy. If so, they are distributed according to the will or the intestacy rules. Whether this is possible depends on whose life is actually insured, the type of risk insured against and how long the policy has been in force before the date of bankruptcy. Of course if the policy does not belong to the deceased the proceeds are not available for the deceased's creditors. They would belong to the owner of the policy. If for example, the spouse has insured the life of the deceased, the spouse will be entitled to the policy proceeds.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.
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