DECENT´S ESTATE INVENTORY – EXCLUSION OF FULL LIABILITY OF HEIRS FOR INHERITED DEBTS UNDER CZECH LAW
Death in our close family is unfortunately associated not only with the loss of our relative, but also with the necessity of distribution of decedent´s assets. The new Czech Civil Code, which has been effective since the 1st January 2014, significantly changed the rules of inheritance of the ancestor´s debts.
According to the old Czech Civil Code, an heir was liable for the deceased person´s debts, as well as for the adequate expenses connected with the deceased person´s burial, only up to the amount of the acquired inheritance. If the inheritance was overindebted, the heirs might have agreed that the inheritance will be given to the creditors for the purpose of satisfaction of their claims. The situation substantially changed from the 1st January 2014 by the provisions of the new Civil Code.
The present-day wording of the new Civil Code states that a decedent´s estate consists of his entire assets and liabilities. However, the new Civil Code also establishes a new legal institute, which is called decedent´s estate inventory. An heir has the right to apply a reservation of the inventory of the estate, within one month from the day on which the court informed him of this right. A decedent´s estate inventory aims to ascertain the decedent’s assets and liabilities and determine the net value of the property at the moment of relative´s death.
In case an heir utilizes the opportunity to require decedent´s estate inventory, he/she is liable for the decedent’s debts only up to the amount of the acquired inheritance and not for the amount exceeding his/her inheritance share.
If the heirs are sure that the estate of the deceased is debt burdened in the extend exceeding the assets, the best way for them is to refuse it. However, in many cases heirs do not know, what the balance of the decedent´s assets and liabilities is. In these cases, it is the best solution to apply for decedent´s estate inventory. The standard way to do so is to ask a notary to perform the inventory of the estate; however, such solution may be costly and complicated.
The Civil Code offers also simplified methods of the inventory, which in some cases may replace decedent´s estate inventory. First of them is a joint statement of heirs and the second one is an inventory of the property made by an administrator who is confirmed by all heirs. However, simplified methods of an inventory may be used only with the approval of a notary handling the inheritance proceeding and effect of these simplified methods may be revoked in case a significant discrepancy appears.
The whole concept of decedent´s estate inventory returned to Czech legal system after many decades and his practical use will certainly develop in following years. Unfortunately for heirs, the concept is more complicated and risky to them and burdens them with additional procedural obligations.
For more information please contact:
Michal Dobiáš, attorney at law
rutland & partners, law firm
tel: +420 226 226 026
michal.dobias@rutlands.cz
