Inheritance with debts

What is an inheritance with debts?

An estate does not only consist of assets. An inheritance with debts occurs when the deceased leaves behind financial obligations in addition to assets. These can be known debts, but also obligations that only come to light later.

Examples of debts in an estate:

• Mortgage or other loans.
• Tax debts.
• Outstanding bills or invoices.
• Personal debts or guarantees.
• Debts arising from a business.

In many cases, it is not clear at the time of death how large the total debt burden is. It is wise to first obtain full insight before making a choice.

What choices do you have as an heir?

Pure acceptance

With pure acceptance, you become a full heir. Both the assets and the debts of the deceased pass to you. In some cases, this can make you personally liable for debts that exceed the estate.

Pure acceptance can also take place tacitly when you perform actions that indicate acceptance, such as selling, giving away, or using goods from the estate. Caution is advised, even if you have not yet made a formal choice.

Acceptance under benefit of inventory

With acceptance under benefit of inventory, you accept the estate subject to an inventory of estate. Personal liability remains, in principle, limited to the balance of the estate. You are not liable with your own assets for debts that exceed the estate.

Acceptance under benefit of inventory entails formal obligations. The estate must be legally settled: creditors must be satisfied before assets are distributed. If these obligations are not met, personal liability may still arise.

Renunciation

Verwerping houdt in dat u geen erfgenaam wordt. U ontvangt geen bezittingen, maar bent ook niet aansprakelijk voor schulden. Verwerping heeft gevolgen voor de verdeling: uw aandeel gaat over op de andere erfgenamen of, bij ontbreken daarvan, op de staat.

Special rules apply to minor heirs. In many cases, acceptance under benefit of inventory is legally required for minors.

When a child has been disinherited via a will but still wishes to claim a portion of the estate, the above choice does not apply. A disinherited child can, in many cases, claim the legitimate portion.

How does the procedure for acceptance under benefit of inventory work?

Acceptance under benefit of inventory follows a fixed procedure at the court:

1. Making a declaration.
   The heir files a declaration of acceptance under benefit of inventory at the registry of the court in the district where the deceased lived.
2. Drawing up an inventory of estate.
   An overview is made of all assets and debts of the estate.
3. Settlement.
   Debts are paid from the estate. Creditors are paid in the correct legal order.
4. Distribution.
   Only after all debts have been paid can any remainder be distributed among the heirs.

Depending on the circumstances, a liquidator may be appointed to oversee this process. Incorrect execution of the settlement can still lead to liability.

When is there tacit acceptance?

Pure acceptance can occur without you making a formal declaration. In many cases, the court assesses whether there is tacit acceptance based on the actions performed by the heir.

Examples of actions that can be regarded as acceptance:

• Selling or giving away goods from the estate.
• Withdrawing money from the deceased’s bank account.
• Paying debts from personal funds while the estate is unmanaged.
• Adjusting the home contents insurance.

Are you unsure whether you have already taken steps that could count as acceptance? Timely legal advice can limit further risks. Discuss your situation in a consultation.

What if there is uncertainty about the extent of the debts?

When it is unclear how large the debts are, it is wise to first gain insight before making a choice. Relevant information you can request includes:

• Bank statements and outstanding loans.
• Tax returns and assessments.
• Any guarantees or indemnities.
• Information from the Land Registry regarding mortgages.

In some situations, heirs or executors refuse to share information. This can lead to a conflict between heirs. Legal guidance may be necessary in such cases to gain access to the required information.

How does the distribution work if there are debts?

An estate can only be distributed after it is clear how the debts will be handled. In the case of acceptance under benefit of inventory, a legally mandatory order applies: first the settlement of debts, then the distribution of the remainder. An incorrect order can create legal risks for the heirs.

You can read more about the distribution on the page distribution of the estate.

Internationale nalatenschap met schulden

In the case of international estates, additional rules regarding jurisdiction and applicable law may apply. Which law applies depends on the deceased’s place of residence, the location of the assets, and any choices made in a will.

You can read more about this on the page international inheritance law. For international estates, a second opinion is often valuable if an advisor or foreign notary is already involved.

Example from practice

After the death of their father, two children were uncertain about the extent of the debts. One of them had already sold goods from the house without realizing that this could have legal consequences. By seeking timely legal advice, it was assessed whether there was tacit acceptance and what steps were necessary to limit further risks. Based on a complete overview of the estate, it was possible to determine which route was most appropriate.

This is general information and does not constitute individual legal advice. Every situation requires its own legal assessment.

Would you like to have your position regarding an inheritance with debts mapped out? Discuss your situation in a consultation.

Written by Carla Simmelink, inheritance law lawyer at Simmelink Lawyers.

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