Which term describes an estate whose liabilities exceed the assets?

• A. A solvent estate
• B. A balanced estate
• C. An insolvent estate
• D. An exhausted estate

Answer: (C)

When liabilities exceed assets, the estate is insolvent. Insolvency means there aren’t enough assets to pay all debts and expenses, so creditors may only receive a portion of what they’re owed and the estate may need to settle for less or be liquidated. The other terms don’t fit this situation: a solvent estate has enough assets to cover debts; a balanced estate would imply assets and liabilities are equal; an exhausted estate isn’t a standard legal term for this financial condition.