How can you tell if an estate is solvent or insolvent?

An estate is generally considered solvent when the value of its assets is sufficient to pay all of its debts and obligations . Conversely, it is insolvent or insolvent when its assets are insufficient to pay what it owes.

To determine the financial situation of the estate, it is therefore necessary to establish its assets and liabilities as precisely as possible.

The asset may include, in particular:

• bank accounts and investments belonging to the deceased;
• the buildings;
• vehicles;
• movable property having value;
• the sums owed to the deceased;
• other assets and rights of value that form part of the estate.

The liabilities may include, in particular:

• credit card and line of credit balances;
• loans and mortgages;
• taxes owed;
• unpaid accounts;
• debts owed to individuals or businesses;
• the other debts and liabilities of the estate.

Comparing the value of the assets with the amount of the liabilities generally helps to determine whether the estate's assets will be sufficient to pay its debts.

However, this verification should not be done too quickly. Some debts may be discovered after death, and the true value of certain assets, particularly real estate or a business, may need to be established before it can be determined with sufficient certainty whether the estate is solvent.

The inventory of the estate plays an important role in this regard, as it establishes the assets and debts that make up the estate. The settlement of an estate includes, in particular, determining its contents and paying its debts.

When the solvency of the estate is uncertain, it is prudent to avoid distributing assets to heirs or paying creditors without first establishing the financial situation of the estate and verifying the applicable rules.

If the assets are insufficient to pay all the debts, special rules apply to their payment. The liquidator must then follow the procedure established for an estate with insufficient assets.