An inheritance is not only composed of assets and other holdings, as the debts of the deceased do not disappear with their death; the debts and obligations they were bound to are also part of the inheritance.
In particular, the inheritance of the deceased is burdened with debts to the state resulting from taxes, with the exception of fines for tax violations, which expire upon the death of the offender, debts arising from the use of credit cards or any personal loans taken, and debts stemming from mortgage loans, where a mortgage is offered as collateral for the loan unless the contract provides for coverage through life insurance.
The debts left by the deceased, as part of the charges on the inheritance, will be satisfied before fulfilling bequests, but only after the expenses for the funeral and the administration of the inheritance have been reimbursed. Furthermore, the personal creditors of the heir can only be paid from the assets of the inheritance after the inheritance creditors themselves have been paid for.
If the division of assets has not yet taken place, and the inheritance remains undivided, it will be the inheritance itself, as an autonomous legal entity, that is responsible for debt payments.
With the division, each heir assumes the position of a debtor with respect to the inheritance debts. The extent of each heir’s responsibility will generally be determined based on their allocated share in the distribution, not the actual value of the assets received. Thus, by accepting the deceased’s inheritance, the heirs also inherit their respective portion of the inheritance debts, becoming responsible for their payment.
What happens when the value of the debts exceeds the value of the inheritance?
It may happen that the accumulated debts of the deceased exceed the total value of the assets and capital that make up their inheritance, resulting in a deficit inheritance. In such cases, heirs can renounce the inheritance, in which case they will bear no responsibility for the inheritance debts.
In cases where it is uncertain whether the inheritance is in deficit or not, the heir may accept it with the benefit of inventory. This means that only the inventoried assets will be liable for the inheritance debts, protecting the rest of the heir’s assets. Therefore, if an heir wishes to accept an inheritance they suspect is in deficit, it is advisable to accept it with the benefit of inventory to avoid being held responsible for debts exceeding the assets received.
Is the heir obligated to accept the inheritance?
No, the heir is not obligated to accept the inheritance under any circumstances and always has the option to renounce it. Renunciation of the inheritance usually occurs because the inheritance is in deficit, but it can also happen for any other reason without the need to specify the reasons for renunciation.
In the case of renunciation, the heir will not inherit any debts from the estate, but they will also not inherit any other assets or rights. The renunciation of the inheritance is an irrevocable decision and, if the inheritance includes real estate, it must be done through a public deed or a privately authenticated document.
For more information on renouncing an inheritance, please consult our article at this link (Portuguese speaks only).
Nuno Cardoso-Ribeiro e Ivo Morgado