An estate can be solvent but short of cash, or it can be genuinely insolvent.

A solvent but illiquid estate has enough overall value to pay its debts but not enough cash. The executor may need to realise assets to create liquidity. If the main asset is a family home, heirs sometimes contribute funds to the estate so that debts and administration costs can be paid without selling the property. Any such arrangement should be properly documented and reflected in the administration.

If the estate’s liabilities exceed its assets, section 34 of the Administration of Estates Act governs the insolvent deceased estate process. The executor reports the position to creditors and, unless the prescribed majority instructs the executor to surrender the estate under the Insolvency Act, the executor proceeds under the section 34 realisation and distribution process. Sequestration under the Insolvency Act remains possible, but it does not arise automatically merely because the deceased estate is insolvent.

Heirs are not ordinarily personally liable for the deceased’s debts merely because they are heirs. They receive only what remains lawfully distributable after the estate’s obligations are dealt with.

See also: Who can claim against a deceased estate? | How to avoid estate duty in South Africa?

Disclaimer: The information provided here is intended as general guidance only and does not constitute legal, tax, or financial advice. Every situation is unique, and legislation is subject to change. We invite you to reach out to our team at Wealth and Legacy Group for guidance tailored to your specific circumstances.