Relatives inherit his debts with the death of the testator. But nobody necessarily remains on the credit installments. Which possibilities of protection exist.
The most important thing at a glance
- 1. Debts remain even after death. They flow as well as the assets of the deceased in the genetic material.
- 2. Relatives can turn down the inheritance.
- 3. If the financial situation of the testator is unclear, an estate administrator makes sense.
- 4. Borrowers can secure the survivors in the event of death.
What happens to the loan at death?
In practice, it often happens that a borrower dies during the term. Now the question arises, what happens with the loan agreement, and who pays for the liabilities.
Estate liabilities are generally transferred to the heirs
The most important thing right away: the debts of the borrower persist even after his death. They flow as well as the assets of the deceased in the genetic material. Since they belong to the estate of the deceased, they are also referred to as estate liabilities.
In plain English:: The obligation passes to the heirs. You are basically liable to the bank for the repayment of the loan.
Who inherits what?
If the deceased has not left a will, all assets – including the estate liabilities – are regulated by law. If there is more than one heir, it is called a community of heirs. All survivors inherit both assets and debts in equal shares.
Bank claims claims in the estate proceedings
The bank asserts its claims in the so-called probate procedure . If the deceased was destitute, the bank must write off the loan. For this reason, banks always check before granting whether the claims can also be realized in the event of death. Especially for large sums corresponding security is required, such as a mortgage on a home loan.
Relatives can turn down inheritance
Estate liabilities are not transferred to the private assets of the heirs. They are served from the deceased’s assets. If the liabilities exceed the assets, the heir would be in debt if he accepts the inheritance. After taking note of the inheritance, it is therefore important to examine the situation in order to get an overview of the existing assets and possible debts. Then an informed decision can be made as to whether the acceptance of the inheritance is worthwhile.
In plain English : An heir has the right to completely reject the inheritance.
What belongs to the heritage?
Not only cash and valuables belong to the estate. During installation, the following components should be considered:
- NPVs on accounts
- Real assets such as real estate
- movable valuables (cash, jewelery, paintings)
- Patents and trademark rights
- use rights
- Claims arising from contracts such as life insurance
- credit obligations
Turn down heritage – how does it work?
Who does not want to accept the inheritance, must make a corresponding disclaimer. This must be submitted to the probate court. If this is not possible in person, the declaration can also be made via a notary. After the inheritance has been knocked out, all claims to it are dropped. This also applies to the compulsory portion as well as the part of the legacy that was not known prior to the waiver.
Important: observe deadline
The renunciation of inheritance can only take place within a period of six weeks. This period begins with the knowledge of the inheritance to run, not already with the death. If the deadline expires, the legislator assumes that the inheritance has been accepted.
In unclear situation: estate administration
If the financial circumstances are unclear, heirs can turn on an estate administrator. The inheritance then does not have to be refused for the time being until the situation has been thoroughly examined. If the estate administration occurs, the debts are first covered from the property of the inheritance. What remains after repayment of the loans to assets, is paid to the heirs. Until the complete settlement, only the estate administrator has the right of disposal. The heir can not have the estate by himself during this time.
Special case guarantee
If the borrower has used one of his descendants as a guarantor, he must be liable for the repayment of the loan. It is usually not possible for a guarantor to free himself from this obligation.
Note : The demolition of the inheritance does not change anything in this case, since the guarantee contract has nothing to do with the inheritance.
Do I come out of the guarantee as an heir?
Under certain circumstances, however, the guarantor may terminate the guarantee. This is possible, for example, if the financial situation of the main debtor changes significantly. It can also be agreed that the guarantee obligation ends under certain conditions. Another variant would be that the guarantor revokes the guarantee. However, he can only do so if there is a right of withdrawal, for example, if the contract was entered into as part of a so-called door-to-door transaction. Finally, there is the possibility to check the guarantee for immorality. It may be immoral if the debtor has taken advantage of a strong emotional attachment to the guarantor, and this is financially overburdened by the obligation.
Special case real estate loan
Another special feature is when the testator leaves a loan for a property, and this was secured by a relative in the context of a mortgage. In the mortgage form a liability declaration is registered. If this has been signed, the bank can enforce the claim in the assets of the person liable.
Note : Enforcement is possible even if the detainee is a relative, and he rejects the inheritance.
If no personal liability has been declared, the Bank will attempt to have the property auctioned by means of the land charge deed and enforce the assets. If the proceeds of the sale are insufficient, the heir must be liable for the loan with his private assets. However, according to § 2014 BGB, he has three months to begin repaying liabilities (so-called three-month defense).
Insure against credit default
An inheritance is not always a favor for the bereaved, but can – if the debts exceed the assets of the deceased – also be a financial burden. However, testators can make provision for such a case.
Payment protection insurance
One possibility is the so-called residual debt insurance. This ensures that the loan continues to be serviced in the event of death. However, this primarily benefits the bank. She works with relevant insurers and receives commissions from them. This significantly increases the monthly loan installment for the debtor.
Term life insurance
Significantly cheaper in the contribution – but not less effective – is the term life insurance. The capital is paid out on death of the testator to the persons who were registered as beneficiaries in the policy. The advantage: the capital is paid out without a specific purpose. If it exceeds the residual debt, the heir can benefit from the remaining assets. If the debts to be acquired can not be covered by the assets, it may also make sense to reject the inheritance. The heirs can still keep the capital from the insurance.