What defines an insolvent estate?

An insolvent estate is characterized by its inability to pay off all outstanding debts, which aligns perfectly with the correct answer. When an estate is deemed insolvent, it means that the total liabilities exceed the total assets available for distribution. This situation arises when the deceased person had more debts than assets at the time of their passing, thus leaving the estate in a position where it cannot meet its financial obligations to creditors.

Insolvency has significant implications, as it can affect how assets are distributed among heirs and creditors. Typically, in such cases, the estate may need to go through a legal process to address the outstanding debts, often resulting in prioritized payouts where secured creditors are paid before unsecured ones.

The other options describe scenarios that do not pertain to insolvency. An estate that is well-managed indicates sound financial practices and likely good asset management, which would not lead to insolvency. An estate able to pay all debts is the opposite of an insolvent estate, as it reflects financial solvency. Finally, an estate that is fully liquidated suggests that all assets have been converted to cash, and the estate has completed its financial transactions, which does not directly relate to insolvency. Thus, understanding these distinctions helps clarify the nature of an insolvent