Paying the debts of an estate: in what order

According to the Gouvernement du Québec, the liquidator pays the estate’s debts once the inventory is complete and the notice of closure of inventory has been published. Not before. The order is not administrative housekeeping: it is what separates a clean settlement from one where somebody ends up paying out of their own pocket.

The reason is simple. Until the inventory is done, nobody knows what the estate holds. Nor what it owes. So you can pay one creditor with money that turns out, three months later, to be owed to another, or not to exist at all.

And a liquidator who has paid has no way of getting the money back. They paid it out; they answer for it.

At the point of paying, an estate is in one of three states: solvent (the assets are worth more than the debts), insolvent, or of a solvency nobody knows yet. It is that last case that catches most people, because it does not look like a problem.

Where the estate is solvent, the liquidator pays without delay: current accounts, funeral expenses, claims arising from the partition of the family patrimony and the liquidation of the matrimonial regime if the deceased was married or in a civil union, then the other debts. They also deliver the particular legacies, where there are any.

The Gouvernement du Québec adds a precaution few people take: even once the inventory is closed, a prudent liquidator waits a few days before starting to pay, long enough to be sure an overlooked asset or an unknown claim does not change the picture.

Where solvency is not obvious, even after the inventory has been closed, the liquidator cannot pay the debts before a period of sixty days has run. It runs from the registration of the notice of closure of inventory in the Register of personal and movable real rights, or from the dispensation from making an inventory.

The delay is not there to slow things down: it gives creditors time to come forward. Paying while it runs means deciding on your own who gets repaid and who does not.

Two things remain permitted meanwhile if circumstances require it: the deceased’s current bills (electricity, phone, heating) and debts considered urgent. That is a narrow opening, and deliberately so.

One thing is not permitted: selling an asset. That requires the consent of the heirs or, failing that, of the court.

It is the step that sets everything else in motion, and most people have never heard of it before having to do it.

Once the inventory is finished, the liquidator registers a notice of closure in the Register of personal and movable real rights. The notice says that an inventory exists and where it can be consulted, not what is in it. There is a form to fill in, a fee to pay and a filing to make.

Then people have to be told: the heirs, the successors who have neither accepted nor renounced yet, the legatees by particular title and the creditors. They are told where the inventory can be consulted and, where it can easily be done, sent a copy.

And there remains the step nobody sees coming: publishing a notice in a newspaper circulated in the locality of the deceased’s last known address. It identifies the deceased and states where the inventory can be consulted.

Settling the debts and handing the heirs their share are two separate operations, and the second has its own condition: tax clearance. Before distributing anything, you need the certificates from Revenu Québec and the Canada Revenue Agency. Distributing without them engages the liquidator’s personal liability for the unpaid tax.

The full sequence (will search, inventory, notices, payments, certificates, partition, final account) is set out on the settling an estate page.

And for the very first days, when none of this is possible yet, there is the first steps for the liquidator sheet, which runs to two pages and prints.

The one rule to hold on to meanwhile: do not pay anything you do not have to pay today.