Debt inheritance – how does it work and how to avoid it?

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The issue of inheritance of inheritance is never easy. It is always associated with the loss of a loved one, and often the obligation to take care of the property matters of the deceased adds to our pain. However, there is usually no way out and you just have to deal with it. However, this is a rather complicated topic, and often the information that we can get from proxies and administrative staff is dominated by legal jargon. Today we will try to shed some light on this intricate topic to help you understand what is really going on when you take over an inheritance from someone. Especially when this decline is burdened by outstanding debts and liabilities.

 

What do we take over inheritance? – assets and liabilities

debt loan

First of all, in the event of inheritance, we will probably be talking about the inheritance of two types of goods. These are assets and liabilities. These terms often appear in the world of finance, although they may sound quite foreign to someone who has never been interested in this world. In a nutshell – assets are values ‚Äč‚Äčthat are a source of income, and liabilities require expenses. Therefore, assets in the context of inheritance will be a flat, car or antique wall unit, while liabilities can be a mortgage or an obligation to pay installments for a television set purchased before the death of the testator. Unfortunately, in the event of the death of a loved one, you can inherit both.

 

Checking inheritance debt

Checking inheritance debt

If we did not have the best relations before the testator’s death, we may not know what we inherit. Maybe we were left a nice apartment in a quiet neighborhood with a well-kept car. Unfortunately, while it is easy to make an inventory of acquired assets because they are tangible objects and physical goods, the situation can be more complicated in the case of liabilities. In fact, the surest way to check the testator’s debt is to thoroughly search drawers and binders with documents for contracts signed with loan companies. You can also ask the court bailiff for the execution of the so-called inventory. In essence, however, it is a written confirmation that we were trying to determine the current status of the deceased’s liabilities and assets, rather than a reliable and proven way to find hidden debts.

 

What does this mean with the benefit of inventory?

What does this mean with the benefit of inventory?

When reading texts about inheritance of inheritances, one can often find information about a change in Polish law of October 2015 beneficial for heirs. Prior to this change, inheritance of debts was always “simple”, which meant that if no specific action was taken against of the succession process, all liabilities and assets of the deceased person were taken care of, regardless of their size. This meant that inheriting the apartment worth $ 400,000, it was possible to take over the creditor of the testator, claiming $ 600,000, which left us in a bad situation and with a new debt that could seriously undermine the household budget. The only exception was when a minor inherited the estate. Then she inherited the inheritance of the inventory, which meant that the inherited liabilities could not outweigh the assets. After the change of October 18, 2015, this rule applies to all heirs. To inherit an inheritance in this way, you must not take any action, i.e. do not accept or reject the inheritance for half a year from the date of opening the inheritance, i.e. the moment when we were informed about the death of the testator.

 

Mortgage debts

Mortgage debts

The law, which protects heirs from unconscious assumption of debt to the testator, unfortunately also has its exceptions. This is the case with debts arising from taking out mortgages. Accepting the inheritance of the inventory will not help here. In accordance with art. 74 of the Land and Mortgage Register Act, the heir’s liability in this case is unlimited. What does this mean in practice? Well, regardless of whether the decline was adopted directly (i.e. all assets and liabilities), or with the benefit of inventory (no more liabilities than assets), the property encumbered with a mortgage can be taken by the bank. Fortunately, this rule cannot be translated into the remaining assets of the heirs, which means that the creditor cannot take more than the property itself. Each situation and each fall is of course a separate case, but usually, if we are dealing with a mortgage debt, it is best to reject the fall.

 

Maintenance debts

Maintenance debts

If the testator was still obliged to pay maintenance for his children while he was still alive, it is still somewhat indebted. Fortunately, maintenance debts are also an exception to the law of succession and they are not passed on to heirs. This means that as soon as the testator dies, the obligation to pay maintenance ceases to apply, i.e. no more maintenance will be charged. So everything is fine if they have been repaid regularly. However, if there are any accrued but unpaid maintenance debts, they can be taken over under normal inheritance rules. In this case, however, they are already included in the liabilities, which, if we take over the debt with the benefit of inventory, will not be able to exceed the sum of assets.

 

Rejecting or accepting an inheritance

Rejecting or accepting an inheritance

We mentioned earlier that in some situations it is best to drop decline. What exactly does this mean and how do you do it? Well, when we inherit someone’s inheritance, regardless of whether it is in connection with a written will or statutory inheritance, we have three options:

  1. We can accept the fall in full – in this case we take over everything, both assets and liabilities.

  2. The inheritance can be rejected – we completely waive the rights and claims against the inheritance, and the inheritance itself passes to the next person in order.

  3. We can take the decline with the benefit of inventory – as we mentioned earlier, we take over everything, but the sum of debts will not exceed the sum of assets, so we cannot be lossy.

In any case, we have 6 months from the date of opening the estate to take action, i.e. the moment when we were informed about the death of the testator. To accept or decline the estate, you must file a letter before a notary or court. Taking over the benefit of inventory is the default option if we do not take any action during these six months.