Debt after parents – can inheritance of debts be avoided?
Concerns about inheriting debts arise in many people who lose a close family member. This is facilitated by regularly appearing media reports about people who have received horrendous amounts of commitments, about which they had no knowledge and too much in common. How does it look in practice? Can debt inheritance be avoided? Where does the parents owe their debts in the event of their death?
How many people, so many models of relationships in families can be found. It is different with these, as you know. Some people maintain regular contacts with their loved ones, while having knowledge of their personal situation, e.g. financial. Others also care about frequent contact, but they leave financial matters in the sphere of secrets of intimate life. Unfortunately, many of us contact our family irregularly, with little knowledge of personal issues.
It is influenced by various factors, such as long distances, emigration, conflicts and many others. Some also consider such issues to be private matters that sharing is considered inappropriate and inappropriate. In practice, the poor knowledge of financial matters does not bring us too much loss. However, in the face of the loss of a loved one or a larger group of immediate family members, can it prove to be a problem for his descendants?
In today’s text we will focus on issues related to the inheritance of debts from parents. This issue embarrasses many people. Not unreasonably. In recent media reports, one could hear in recent years about cases of inheritance of debts by relatives of the deceased. It turned out after their death that their grandparents or parents had considerable debts during their lives, e.g. due to unpaid loans. This led to problematic situations of inheritance of debt, which today – more and more people are trying to avoid. Let’s see what the issue of inheriting debts from parents looks like up close.
Anyone can be a debtor – also your loved ones
Every year, debt problems reach a huge proportion of Poles, and their amounts sound more and more overwhelming. According to the data of the National Debt Register from November 2018, only 2.5 million Poles had debts for a total amount of up to PLN 45.7 billion 1. The universality of debts should not come as a surprise – there are plenty of opportunities to incur financial liabilities today. Buying goods in installments, widely available loans, loans, payday loans, credit cards and much more. All this brings us immediate benefits, but also a burden on finances for months or even years.
Many people often face big problems when paying off their debts. Despite good intentions and discipline towards the creditor on the contract, ambitious plans cross unexpected expenses. Faced with the choice of, for example, renovating an apartment and paying on time, seemingly, a small installment for a commitment, many choose the first option. Unfortunately, this results in consequences that you don’t have to wait long for.
Falling into debt means that creditors often decide to quickly notify financial records. Depending on the type of commitment and scope of cooperation, not only IKD (Credit Information Bureau) but also e.g. registers of Economic Information Bureaus (BIG) may be informed about debts. In addition to the famous KRD (National Debt Register).
You may never know about your loved ones’ debts
Looking at the abovementioned KRD statistics from November 2018, it is clear that literally anyone can become a debtor. I am also talking about age 2. Not only middle-aged people fall into debt for various reasons. Trappi are also young people, on the verge of retirement, pensioners. Having debt for many of them is a shame. They treat it as part of the sphere of intimate life, a personal matter that should not be discussed with anyone. Some behavior in this matter can be interpreted as “nothing to brag about.” Not only friends, friends but even loved ones do not know about debts.
During the lifetime of the debtor, his problems with financial arrears may indeed have no effect on his family members. I’m talking about families who live separately. However, the situation is different when the debtor dies. All the worse when it happens suddenly and his loved ones didn’t have time to talk to him about everything. This is often the case for parents and their children. These should not underestimate the potential debt of parents – by law, they are ultimately the closest heirs of their property, unless they have been previously disinherited. Is there anything to worry about?
Debt from parents – are they passing on to children? When are the children responsible for the parents’ debt?
When the child of the debtor has already learned about the financial problems of the parent, in which he fell into life, it is worth clarifying at the beginning a key issue. The creditor cannot demand repayment by any of the debtor’s children simply because they are close to the debtor. They are not connected by a property community with a parent, as is the case with spouses who have not signed the intercourse (property division). As a result, the debtor’s child’s assets cannot be the subject of proceedings for the return of overdue cash.
There are, however, situations in which there is an exception to the above-mentioned principles. It is worth knowing such circumstances and if necessary – do everything not to comply with the principles outlined in them.
- The first exception is when the heir unknowingly accepts his parents’ debt. This can happen, for example, by taking over an apartment that has property that is subject to recovery. If the creditor finds that the confiscation of, for example, a TV set as a loan, duly compensates for the amount of debt, then he has the right to take such action.
- If during the parent’s lifetime we decided to become a loan or credit guarantor, then the consequences of such a declaration will be felt after the death of the debtor. The bank or loan company will have the full right to pursue the claim against the guarantor. In this case – his child. The fact of this relationship does not matter, of course. The creditor will demand reimbursement of the remaining amount, not because the consumer is close to the debtor, but because he vouched for him during the conclusion of the contract of commitment. However, this scenario should not come as a surprise. The resident is always informed about this type of risk when signing the loan document.
- The third and most important exception is the situation in which the child of the debtor is his heir, that is, the property has been completely transferred to him. It is such a big issue that we will devote the remainder of today’s article to it. We invite you to continue reading.
Parent debt – how to check if the inheritance contains it?
Remaining heirs of a deceased person can bring quite extreme consequences among themselves. If the parent was a wealthy person who had, for example, flats, bonds or valuable property on his account, the forfeiture of such assets to his descendant can bring him a lot of positive benefits. This can mean not only an injection of a large amount of cash, but also a clear improvement in property status, which can be a prudent investment for the future in a prudent way. However, there are also assets that contain unpleasant surprises.
Unfortunately, the heir’s knowledge of the debts related to the estate of a deceased parent is very limited. I am talking about a situation where the testator’s child has not yet taken any formal steps against the property. Many entities that may be potential creditors of a parent are subject to secrecy, such as banks and loan companies. For this reason, in order to have at least basic knowledge about debt, you need to carefully look at the documents left by the deceased.
Perhaps they can find, for example, outstanding payment requests, a loan agreement, or any other document confirming that the deceased parent had some obligations before his death. However, if none of them were shared between the heir and the deceased, then nothing should be feared. The right pond now inherit a fall in a very comfortable position. What should you know about this topic?
Does the heir have to take over the estate?
The current law puts the heir in a fairly favorable position. Pursuant to the amendment of October 18, 2015 regarding inheritance 3, the heir currently has 6 months (half a year) to accept or reject the inheritance altogether. The second solution is especially recommended if you want to make sure that the inheritance is not in debt. If it turns out that it is relatively small and the amount of debt is sky-high, then it is even advisable to reject the inheritance. However, it is necessary to take a position by submitting an appropriate statement to the court or notary.
If this does not happen, then in the said period of 6 months the inheritance is automatically inherited from the so-called inventory benefits. This is the largest change introduced by the discussed amendment to the provisions of the Civil Code (Article 1015) of October 2015. What exactly is this about?
Inheritance with the benefit of inventory – what does it consist of?
Inheriting the inheritance with the benefit of inventory is a situation in which the heir inherits the property automatically after he has not taken an appropriate written position for him for six months from the announcement of the inheritance. The forfeit in this way also includes the amount of debt, but only up to the fixed state of active decline. For example, if the assets are worth PLN 30,000 and the debt is PLN 40,000, the heir will have to pay back the debt of no more than PLN 30,000.
It may also turn out that the deceased left only inexpensive property. Then, the value of potential debt to be paid will be even smaller. For example, inheriting from a deceased parent a TV set worth thousands of zlotys, exactly the same amount of debt (if it was more than this amount), the heir will have to regulate. Article 1031 of the Civil Code refers to this.
Debt from parents – how to avoid inheritance?
Heading towards the summary of the above-mentioned information, it is time to finally ask an important question. Is it possible to take effective action to avoid inheriting debt from parents? Of course! Having already ad hoc knowledge about the scheme of action after the death of a parent regarding the inheritance, it is worth knowing for the future what to do so that it will not be accompanied by unnecessary confusion. If during your loved one’s life you did not have the best knowledge of his financial situation or – what is worse – you were aware of the tendency to fall into debt, then a good solution may be the so-called waiver agreement.
It is a document that is between two parties – the parent (testator) and the child (potential heir). Under the arrangements made during the parent’s lifetime, in the event of his death, no part of the inheritance falls on the child, and he has no rights to him. As a result, he does not have to worry about making any additional statements and whether unexpected debts will arise after leaving the loved one.
The inheritance waiver agreement is entered into as a notarial deed, with two copies for each party.