What happens if the estate has debts?

Question

José Manuel Alburquerque · Accepted Answer

The deceased's debts do not disappear. They are paid out of the estate and, if it is not enough, an heir who simply accepts is liable with their own assets. To avoid this, the heir can accept with the benefit of inventory, which limits what they pay to what they inherit, or renounce the inheritance. Until they accept, they are not liable for anything. Someone who only receives a legacy or the forced share (“legítima”) does not pay the debts out of their own assets, although the creditors are paid before them. How the heir is liable If the heir simply accepts, they are liable for the debts with the assets of the estate and, if those are not enough, with their own. Until the estate is divided, the creditors are paid from the assets of the estate. The deceased's fines and penalties do not pass to the heirs, not even those imposed by the tax authorities. The taxes they left unpaid do pass, with interest and surcharges. So does any compensation they owed for a criminal offence, although the punishment itself ends with their death. Mortgages remain secured on the mortgaged flat. If nobody pays them, the bank can enforce against the flat. How to protect yourself Accepting with the benefit of inventory. It is enough to draw up an inventory of the assets and debts within six months of learning that you are an heir, before a notary or with the tax return for the “impuesto de sucesiones”, the Spanish inheritance tax. You are then only liable up to what you inherit. Applying for an inheritance tax extension does not lengthen that period. Renouncing before a notary. Someone who renounces pays nothing, but receives nothing from the estate either. They can, however, receive the proceeds of a life insurance policy under which they are the beneficiary. Not doing anything that amounts to accepting, such as selling, giving away or transferring the deceased's assets or spending their money as if it were your own. Anyone who hides assets of the estate or keeps them can no longer renounce. Looking after the assets and doing what is needed to preserve them does not amount to accepting. Finding out about the debts first. The heirs can ask the “Banco de España”, Spain's central bank, for the deceased's credit risk report, listing their loans and guarantees, by providing the death certificate, the certificate of last wills (from the “Registro General de Actos de Última Voluntad”, Spain's register of wills) and the will or the declaration of heirs. They can also ask the tax authorities, the “Seguridad Social” (the Spanish social security system) and the town council for information about the deceased's debts. If the heirs renounce The share of the person who renounces goes to whoever the will provides for or, if it says nothing, to the other heirs. Without a will, it goes to the others called to inherit in the same degree, such as their siblings. If all the children renounce, it goes to the grandchildren, who will in turn have to decide, unless the surviving spouse or partner is the father or mother of all the children. In that case it goes to the surviving spouse or partner. If in the end everyone called to inherit renounces, the estate ends up with the Generalitat de Catalunya (the Catalan government), which is only liable for the debts with the assets of the estate. Nothing can be claimed from someone who has renounced. Once a month has passed since the death, any creditor can ask a notary to formally require the heir to make up their mind. If the heir does not accept before a notary within two months, as a general rule they are deemed to have renounced.