'He that dies pays all debts' is just as appropriate today as in William Shakespeare’s day, because when someone passes to the great tax haven in the sky, the debts don’t die with them. They still have to be settled before any payments are made to beneficiaries in the Will.

But what happens if debts exceed assets, and what are the responsibilities of an executor or estate administrator if this is the case?

Most executors’ first thought is to arrange the funeral, but if there isn’t enough money in the estate to pay for it, the person who booked it will be liable. However, if the executor is receiving a means tested benefit, they may be eligible for a funeral payment grant to help with the costs.

The first thing an executor should do is to make sure all the debts have been identified before anything is paid. This is particularly important if there is a chance that there may be 'unidentified' debts, as the executor can be personally liable for any debts which come to light after the estate has been settled. The accepted standard is to place an advertisement in the London Gazette and a local paper in the style required by the Trustee Act to advise anyone who may have a claim to contact the executors. You must wait two months, but if nobody responds, then the executor can pay the beneficiaries.

If the estate does not have enough funds to pay all the debts, there is a strict priority for payment. The first call is any mortgage balances that may be outstanding. The funeral costs come second even before government debts such as HM Revenue and Customs, overpaid social security payments and unpaid pension contributions. Bottom of the list are personal debts such as credit cards or bank overdrafts.

Only when all the debts have been paid can those who were named in the Will look forward to their windfall. Sometimes people are a little over-optimistic when making a Will, and if there isn’t enough left to pay all the beneficiaries, specific legacies are paid first. These are defined amounts to named people, so if the Will specifies that cousin Willie will receive £500, cousin Willie gets his gift before anyone else. If there are several legacies and there is insufficient to pay them all in full, they must be paid pro-rata depending on the total residual estate after debts.

It’s only after all these legacy payments have been made that the remainder can be divided amongst the others named in the Will. However, if there is nothing left, then they really will be poor relations as they will walk away empty handed.

If you would like more advice on Wills contact Teresa McCutcheon at Motley & Hope Solicitors in Biggleswade. Contact Teresa on 01767 600600 or e-mail TeresaMcCutcheon@motleyandhope.co.uk.