Inheritance is not always associated with financial benefits. On the contrary - in some situations, inheritance can represent a considerable financial burden for the heirs.
What options do I have as an heir in the event of an encumbered inheritance?
Firstly, it should be noted for every heir that, as the legal successor of the deceased, they inherit not only the positive assets, but also their debts and liabilities. This is justified by the wording of Section 1922 of the German Civil Code (BGB), according to which a person's assets are transferred in their entirety to the heirs upon their death.
Pursuant to Section 1967 (1) BGB, the heir is also liable for the liabilities of the estate. Pursuant to Section 1967 (2) BGB, the liabilities of the estate include, in addition to the debts of the deceased, the liabilities of the heir as such, in particular the liabilities arising from compulsory portions, legacies and conditions.
The challenge with heir liability is that the heir is not only liable for the debts of the deceased with the inherited assets, but in case of doubt also with his own private assets, which he actually wanted to increase through the inheritance. If the heir realises that he would ultimately emerge from the inheritance with a negative result, it is imperative that he renounces the inheritance. The waiver can be declared to the probate court within six weeks.
If the waiver is made in due form and time, the heirs are no longer liable for the liabilities of the estate, but in return they do not receive the positive assets of the estate.
In addition to ordering an inheritance, the testator can also encumber the estate by ordering a legacy in favour of a third party. As the amount of a legacy is not subject to any restriction, the question of the economic purpose of the inheritance also arises for the heir in this case. This is because the heir is the debtor in the case of a bequest.
In this case too, the heir can free himself from the legacy debt by disclaiming the inheritance. In contrast to disclaiming an inheritance encumbered by old debts, the disclaiming heir does not lose all rights in the event of encumbrances ordered by the testator. Instead, in the case of an inheritance encumbered by a bequest or condition, the disclaiming heir entitled to a compulsory portion is entitled to his or her compulsory portion in accordance with Section 2306 BGB.
In such a case, the heir entitled to a compulsory portion has two options: Either he accepts the inheritance and settles the legacy claims or he rejects the inheritance and receives the compulsory portion.
If the heir has decided to accept the inheritance despite the burdens associated with the inheritance, Section 2014 of the German Civil Code grants him/her a certain amount of leeway until he/she has to settle the inheritance liability. Pursuant to Section 2014, the heir is entitled to refuse to settle an inheritance liability until the end of the first three months after accepting the inheritance.