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Accepting an insolvent inheritance: what are the consequences?

Are you called upon to inherit an insolvent estate? You must be careful, because if you accept the inheritance, you could also inherit the deceased's debts and have to pay them out of your own pocket! So, what can be done to avoid the unfortunate consequences of an insolvent inheritance?

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In matters of inheritance, it is always preferable to consult a inheritance law attorney , so that they can advise you on the best course of action. The topic will therefore be the insolvent inheritance and the consequences of accepting or renouncing such an inheritance.

The insolvent estate: what is it?

An estate is insolvent when the person dies with more debts than assets. After death, the deceased's estate must be liquidated and distributed among the heirs. The deceased's estate represents all of their property, thus their assets (the deceased's property) and their liabilities (the deceased's debts).

When the value of the deceased's liabilities exceeds the value of their assets, the estate is then considered insolvent. If you inherit an insolvent estate, you must be cautious and take certain measures to avoid the costly consequences of an insolvent estate.

How to know if an estate is insolvent?

It will generally be up to the executor of the estate to carry out the necessary steps to determine whether the estate is solvent or not. To learn more about the deceased's financial situation, the executor will conduct a preliminary review by consulting the deceased's affairs, such as their bank accounts, credit card statements, etc.

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Generally, the liquidator can easily know what the deceased's finances look like in order to inform the heirs about the solvency of the estate. However, it can be difficult to be aware of certain debts of the deceased after a single examination, particularly the division of the family estate if the deceased was married, the alimony that a family member may claim after death or hidden defects on a house sold by the deceased.

Accept or refuse the insolvent estate?

As an heir to an estate, the law gives you thechoice to accept or refuse to inherit the deceased's assets. No one is obliged to accept an estate, whether it is solvent or not.

Renouncing an Insolvent Estate

If you choose to renounce an insolvent estate, you will not be held responsible for paying the deceased's debts . However, you also will not be able to receive the deceased's assets. It's very important to consult a lawyer or a notary if you decide to renounce the estate. They can help you draft the necessary documents to express your intention to refuse the estate. Indeed, renouncing an estate must be done expressly, within six months of the death before a judge or a notary.

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Thus, by renouncing a deficit estate, you will be assured not to have to pay the deceased's debts out of your pocket, but you will not receive any of their assets. If all the heirs renounce the estate, it is necessary to communicate with the Ministry of Revenue in the department of unclaimed property who will take care of settling everything.

Accepting the Insolvent Succession

If you accept the succession, whether tacitly or expressly, you inherit both the deceased's assets and their debts . Thus, if the succession is insolvent, you could be called upon to pay the deceased's debts out of your own pocket.

Be careful, the law provides a means for the heirs to be responsible for the deceased's debts up to the value of the assets they inherit. In other words, you can avoid having to pay more than the value of the share you inherit. To do this, you must very closely follow all the steps provided in the Civil Code of Quebec in terms of liquidating a succession.

If the liquidator follows all the steps provided for by law, the heirs will not have to pay the difference in their own relatives' debts, even if the deceased's assets are insufficient to pay his debts. Accepting an insolvent inheritance can be an interesting option for an heir who, for example, is a co-owner of a property with the deceased.

For example, if you inherit a sum of $20,000, but the deceased's debts amount to $80,000, you will only be responsible for the deceased's debt up to your share in the estate, which is $20,000. Of course, this is only applicable if all the steps of the estate liquidation have been followed.

If the steps of the estate liquidation are not respected, you could, as an heir, beliable beyond the value of the assets you receive from the deceased. For example, this will be the case if you exempt the liquidator from taking inventory of the deceased's assets and debts. The same applies for failure to publish a notice of inventory closure in a newspaper and to register it in the Personal and Real Rights and Property Register.

Tacit acceptance of the inheritance

Be careful! It is possible that you accept an inheritance without necessarily realizing it.

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Certain actions are considered as tacit acceptance of the inheritance. This is the case if, for example:

  • You use the deceased's property as if it were your own;
  • You transfer the balance of the deceased's account into your own bank account;
  • You do not renounce the inheritance through a notarial deed within six months of death;
  • You appoint an executor to the estate or you agree to assume this role yourself;
  • You exempt the executor from making an inventory of the deceased's property.

Therefore, you must be careful with these actions that can be considered as an acceptance of the inheritance, even if it is insolvent. To avoid any confusion about the actions you can or cannot take, it is always advisable to discuss with a legal professional so that they can help you see things more clearly!

If you accept the succession tacitly, the same consequences will occur in terms of the payment of the deceased's debts. You will need to follow all the steps of the liquidation of the succession so that you are not called upon to assume the debts of the deceased beyond your share in the succession.

Find a succession law attorney with JuriGo!

The choice to accept or refuse a succession can prove quite difficult, especially when it is insolvent. There are both advantages and disadvantages associated with the acceptance of an insolvent succession. This option allows you to receive the deceased's assets, but it makes you responsible for the deceased's debts up to the value of the assets you inherit.

In the worst-case scenario, if the steps of the liquidation of the succession have not been followed, you could even be called upon to pay the deceased's debts out of your own pockets.

A succession law attorney can help you make the most judicious choice, whether to accept or refuse the inheritance. This legal professional can also help you comply with all the rules provided by law regarding the settlement and liquidation of the estate to avoid unpleasant surprises.

An attorney can simplify your work and bring you peace of mind. JuriGo is here precisely to help you find a succession law attorney to assist you with an insolvent estate!

The process is very simple: you fill out the form at the bottom of the page and we will put you in contact with a succession law attorney near you, all for free and without obligation!