Liability of Heirs

From Max-EuP 2012

by Tobias Helms

1. Basic principles

The principle that a person’s liabilities are not extinguished by his death has been recognized across all national divides and epochs. Following the tradition of Roman law, most legal systems make a deceased’s heirs (succession law) personally responsible for the deceased’s liabilities. This correlates with the principle of universal succession (devolution of the inheritance/ universal succession), whereby the deceased’s entire estate, ie all assets and liabilities, vests in the deceased’s successor. The underlying philosophy of the doctrine of universal succession is that the person who gains the advantages of an inheritance should also be the one to bear its burdens (Belgium: Art 724(1) Code civil; Germany: §§ 1922(1), 1967 Bürgerliches Gesetzbuch (BGB); France: Arts 724, 785 Code civil; Italy: Art 459 Codice civile; the Netherlands: Art 800(1), 1002(1) Burgerlijk Wetboek (BW); Austria: §§ 547 ff Allgemeines Bürgerliches Gesetzbuch (ABGB); Poland: Art 922(1) Kodeks zywilny (Polish civil code); Portugal: Art 2068, 2071 Código civil; Switzerland: Art 560 Swiss Civil Code (ZGB); Spain: Arts 657, 659, 661Código civil).

However, there is also in certain European jurisdictions a different model based on the premise that heirs should gain only the benefit remaining after an estate’s liabilities have been discharged. In particular, the English and Scandinavian legal systems provide for a procedure whereby an administrator or executor, who is not normally personally responsible for the liabilities of an estate, discharges the latter and then distributes the remainder of the estate, if any, among the heirs. Under English law, a personal representative charged with the administration of a deceased’s estate is either appointed by the deceased’s will (executor) or by the courts (administrator). Under Norwegian and Danish law this function is discharged by a court which holds the legal title to the estate until it has been distributed among the heirs. Swedish law chooses a different path, turning the estate itself into a legal person (dödsboet) and making it thereby the holder of the deceased’s rights and liabilities.

However, these two different approaches do not represent irreconcilable opposites, since a transition from one regime to the other is often possible. Under Danish law, for example, heirs can prevent the administration of an estate by a court if they declare that they accept personal liability, thereby assuming the deceased’s rights and obligations themselves. In Norway, it is sufficient for a single heir to declare his willingness to be held personally liable. Conversely, some legal systems moulded by Roman law, recognize a restriction of liability to the estate during an intermediate stage, particularly where universal succession has not yet occurred (hereditas iacens), as is the case before devolution (Einantwortung) in Austria or before acceptance or rejection of the inheritance in Italy (inheritance, acceptance and disclaimer). In addition, mechanisms exist for subsequently separating the inherited estate from the heir’s other assets (with the effect that the heir’s personal liability is restricted to the inherited assets) and for allowing third parties to conduct the settlement of the estate.

Aside from the deceased’s debts, an heir’s personal liability also includes responsibility for obligations triggered by the succession, in particular where claims for a compulsory portion of the estate arise, or claims arising from legacies, insofar as the deceased has not determined otherwise. This distinction is usually highlighted in the terminology used to describe the heir’s liabilities (eg in France: dettes et charges, in Austria: Verbindlichkeiten und Lasten, in England: debts and expenses). Generally these additional liabilities only have to be discharged after the deceased’s debts have been paid.

2. Subjects of liability

In legal systems incorporating the principle of universal succession (devolution of the inheritance/universal succession) the distinction is usually drawn between intestate and testamentary heirs, who are subject to personal liability in their capacity as universal successors, and legatees (legacies), who are not so liable. However, in some legal systems (eg France and Belgium), testators can only dispose of their estate by way of legacies since they are not allowed to appoint an heir. As a result, certain legatees are held liable for the estate’s liabilities. In this way, for example, a légataire universel is made liable under French and Belgian law (Arts 785, 1009 of their respective Codes civil), as well as a légataire à titre universel, the legatee of a portion of an estate (Art 1012 of their respective Codes civil). Spanish law also extends an heir’s liability to legatees where the entire estate is distributed by legacies (Art 891 Código civil).

In addition, in many European legal systems the right to a compulsory portion does not constitute a mere claim under the law of obligations (as it is, for example, in Germany) but is an instance of forced heirship with the result that the persons affected actually become heirs and are thus liable as such (cf France: Arts 912 ff Code civil; Italy: Arts 536 ff Codice civile; Spain: Art 806 Código civil; Belgium: Arts 913 ff Code civil; Switzerland: Arts 470 ff ZGB; Sweden: Ärvdabalk (ÄB) 7:1 ff).

3. Solidary liability vs pro rata liability

Where there is a plurality of heirs (succession law) which can only happen in legal systems which do not follow the Nordic/English model of administration by a personal representative―the question arises as to how liability is to be divided between the heirs. Roman law provided that after the inheritance had been divided between the heirs all liabilities that had not been met should also ipso iure be divided, insofar as they are divisible. Each heir was then only liable pro rata, that is, proportionately to his share in the estate. Almost all Romanistic legal systems (France: Arts 1220 ff Code civil; the Netherlands: Art 4:182(2) Burgerlijk Wetboek (BW); Italy: Art 753(1) Codice civile; Portugal: Art 2098 Código civil), but also in a number of other European legal systems (Greece: Arts 1884 ff Greek Civil Code; Poland: Art 1034(2) Kodeks zywilny (Polish civil code); the Czech Republic: § 470 s 2 Czech Civil Code) still follow this approach.

The counter-model, which is more favourable towards the interests of the estate’s creditors, establishes a regime of solidary liability of heirs (solidary obligations) and is recognized today, above all, in the laws of Germany (§ 2058 BGB) and Spain (Art 1084 Código civil). However, even in Germany a transition from solidary liability to pro rata liability is possible through public notification of creditors under § 2061 BGB (Gläubigeraufgebot). Austria has a mixed system, the liability of an heir depending upon whether he provides a conditional or unconditional declaration to accept the inheritance (§§ 820, 821 ABGB). The Swiss ZGB, like the German BGB, recognizes a regime of solidary liability after the inheritance has been divided (Art 639 ZGB), unless the creditor consented to the division.

Pro rata liability can prove to be disadvantageous for the estate’s creditors, and they will consequently try to make sure that they are satisfied from the undivided estate if at all possible. Under legal systems with pro rata liability, creditors who have not yet obtained satisfaction therefore have a say in the division of an estate (cf France: Art 882 Code civil; the Netherlands: Art 3:193 BW and Art 3:193, 2 BW; in Greece: Art 1913 Greek Civil Code).

4. Excluding and limiting liability

In those legal systems under which heirs only receive whatever remains after the discharge of the estate’s liabilities, the person or entity responsible for the administration of the estate is usually not personally liable. Liability is limited to the estate. By contrast, under the model first established by Roman law heirs are usually personally liable for the debts and expenses of the estate. However, legal systems subscribing to this model usually have several devices for excluding or at least limiting personal liability. Heirs in Portugal find themselves in a comparatively comfortable position, as their liability is in any event generally restricted to the value of the estate (Art 2071 Código civil).

a) Acceptance and disclaimer

The most effective way to escape liability as an heir is to avoid becoming the deceased’s successor, or to reverse that position (inheritance, acceptance and disclaimer). Adhering to the tradition of Roman law, one group of European legal systems provides that while an heir automatically acquires the inheritance, he can retrospectively disclaim his position, and consequently his liability as heir (eg Germany: §§ 1943, 1944 BGB; France: Arts 711, 718, 786 Code civil; Greece: Arts 1847, 1848 Greek Civil Code; Switzerland: Art 566(2) ZGB). The counter-model is based on the idea that an inheritance is not acquired automatically, but either by acceptance (Italy: Arts 459, 470 ff Codice civile, Spain: Arts 988 ff Código civil) or by a devolution of the estate as a result of probate proceedings (gerichtliche Einantwortung; Austria: § 799 ABGB). Under English law, a personal representative, who can be subject to personal liability under certain circumstances (see 5. below), also has the opportunity to decide whether he will accept or reject the position. The courts can request that the person concerned make a declaration on the matter.

b) Beneficium inventarii

As an heir will often be unable to tell whether or not an estate is overindebted, many legal systems provide for an alternative to the radical solution of complete rejection of an inheritance, ie, acceptance subject to the benefit of inventory. Under Roman law, the liability of heirs was traditionally unlimited. However, after privileges as to liability had first been granted by Emperor Gordian to soldiers, the beneficum inventarii was extended as a general means for limiting liability in the Corpus Juris Civilis.

The great majority of European legal systems has adopted this mechanism: in Spain, acceptance a beneficio de inventario (Arts 1010 ff Código civil), in Italy col beneficio d’inventario (Art 470 Codice civile), in Portugal a benefício de inventário (Art 2052(1) Código civil) can be found. Under different terminology but with a similar meaning, one finds acceptance z dobrodziejstwem inwentarza in Poland (Art 1012 Kodeks zywilny), onder voorrecht van boedelbeschrijving in the Netherlands (Art 4:190(1) BW) and mit Vorbehalt der Rechtswohltat des Inventariums in Austria (§ 800 ABGB). In France, acceptance sous bénéfice d’inventaire (Art 732 Code civil) was replaced in 2007 with the essentially similar acceptance à concurrence de l’actif net. In Switzerland, an application can be made for the official filing of an inventory (Art 580 ZGB) following which the inheritance can be disclaimed, accepted, or accepted subject to the benefit of inventory; alternatively, an official liquidation of the estate can be requested (Art 588 ZGB).

Acceptance subject to the benefit of inventory is usually subject to compliance with certain time limits both for the declaration as such and for the drawing up of an inventory. The inventory is drawn up either by the heir himself or by a public official. The effect of an acceptance subject to the beneficium inventaris is often the full limitation of an heir’s liability to whatever is contained in the estate (Italy: Art 490(1) and (2) Codice civile; Spain: Arts 1010, 1014, 1024 Código civil; Portugal: Art 2071, 1 Código civil; Greece: Art 1904 Greek Civil Code). However, sometimes the limitation only relates to the value of the estate, a regime that is practically more difficult to manage (France: Art 791 no 3 Code civil; Poland: Art 1031(2) Kodeks zywilny). The benefit of inventory is lost if an heir intentionally draws up an inaccurate inventory (cf Italy: Art 494 Codice civile; Spain: Art 1023 Código civil; Greece: Art 1911 no 2 Greek Civil Code; France: Art 800(4) Code civil).

In contrast, the drawing up of an inventory under German law is not a mechanism for limiting the liability of the heir, but rather for allowing the creditors to gain an overview of the estate. Where an heir does not draw up the inventory during a time limit fixed by the probate court (§ 1994(1) BGB), or intentionally draws it up inaccurately he loses the possibility to limit his liability (§ 2013 BGB). If an heir wishes to limit his liability under German law, he must apply for administration of the estate (§§ 1981 ff BGB) or—where the estate is overindebted—apply for the commencement of insolvency proceedings concerning the estate (§§ 315 ff Insolvenzordnung (InsO)).

c) Public notice to creditors

An equally widespread approach to limiting the risk of liability is a public notice to all creditors to register their claims in a formalized process. However, where creditors do not register in time, the legal consequences differ between jurisdictions. For example, late claims are, in principle, extinguished under Norwegian law (§ 75(1) Act on Partition). The same legal consequence applies to claims under French law which are not secured by a right in rem property if the creditor has not registered his claim within 15 months after the publication of the acceptance à concurrence de l’actif net (Art 792 Code civil).

Conversely, heirs can refuse to satisfy a late-registered creditor under German law (which does not recognize an acceptance subject to the benefit of inventory) only to the extent that an estate has already been depleted by punctually registered creditors (§ 1973(1) BGB). The same applies in Austria (§ 814 ABGB) where, as in a number of other legal systems, failure publicly to notify all creditors limits the benefit of inventory such that, where the statutory ranking for creditors has not been observed, creditors are not bound to acknowledge payments made to fellow creditors (§ 815 ABGB). In Switzerland, notification of creditors (Rechnungsruf) is always effected in conjunction with the drawing up of an inventory (§ 582 ZGB), which is a prerequisite for any limitation of liability. Here, the legal consequences for non-registered creditors are substantially more severe: neither the estate nor the heir will be liable to them (Art 590 ZGB). If, however, a creditor fails to register through no fault of his, the heir will be liable, but only insofar as he is still enriched by the estate (Art 590(2) ZGB).

Under Italian law, an heir may satisfy the estate’s creditors, in principle, in the order in which their claims are asserted (Art 495(1) Codice civile). However, other creditors can object to this in order to obtain equal satisfaction. If the heir wishes to retain the privilege of the beneficum inventarii, he must thereupon enter into a special settlement procedure, including publicly notifying creditors to register their claims (Arts 498, 499 Codice civile). In England, public notification of creditors (Trustee Act 1925, s 27) is a central means available to personal representatives to ensure that they do not become personally liable to the estate’s creditors as a result of the distribution of the estate effected by them. Where public notification to creditors has been given, and the estate is thereafter distributed, the personal representative will not be liable, unless he was otherwise aware of an unregistered creditor’s claim.

d) The doctrine of abandon and the administration of estates

An even more far-reaching way of excluding the liability as an heir is embodied in the doctrine of abandon, which is recognized by some legal systems. An heir can avail himself of this instrument in order to avoid any personal liability by relinquishing the estate to its creditors. While France did away with the doctrine (see Art 802(1) Code civil old version) in its reform of 2006, replacing the bénéfice d’inventaire with the acceptation de la succession à concurrence de l’actif net, it still exists in Italy (Art 507 Codice civile) and Greece (Art 1909 Greek Civil Code). In practice, this corresponds to the official liquidation under Swiss law (Arts 593 ff ZGB) as well as administration of an estate in Belgium (Art 803bis Code civil) and Germany (§ 1981 ff BGB), which is ordered on application by the heir and also leads to complete exclusion of liability. Under the doctrine of abandon, the responsibility for the administration of the estate is transferred to the creditors, while in the case of official liquidation or administration—comparable to the rules concerning settlement of the estate under English and Nordic law—an impartial administrator distributes the estate to the creditors. If there is a remainder after the satisfaction of the creditors, it must be given to the heirs (Germany: § 1986(1) BGB; Italy: Art 508(3) Codice civile; Switzerland: Art 596(3) ZGB).

5. Extension of liability

While the legal systems proceeding from the principle of unlimited liability of heirs recognize several mechanisms for limiting that liability, under the Nordic and English legal systems—which adopt the opposite approach—an extension of liability is possible. Primarily, the persons entrusted with the administration of an estate can attract personal liability if they fail to fulfil their legal duties with due care. Such a breach of duty is known as devastavit in England (for Sweden see ÄB 18:6). The relevant duties of the administrator include the collection and preservation of the estate, the handling with due care of the items forming part of the estate, the duty to discharge the estate’s debts, the protection of the estate from unjustified claims and the correct distribution of the estate. A further possibility for extending liability exists in Denmark, where heirs can waive the advantages associated with the formalized distribution procedure in order to be able to distribute the estate freely, with the consequence that personal liability attaches to them (see § 52 SL).

6. Protection of the creditors

It is not only the relationship between the estate’s creditors and the heirs, but also the one between the estate’s creditors and the heir’s creditors, which forms an important aspect of the heir’s liability. This becomes evident when either the heir or the estate is overindebted. If the heir is overindebted, the heir’s personal creditors stand to benefit from the inheritance as a result of the increase in the heir’s assets, while the estate’s creditors may be disadvantaged as they now have to compete with more creditors. Conversely, where the estate is overly indebted, its creditors stand to benefit from the inheritance through the additional assets in the heir’s estate; the heir’s personal creditors, in turn, run the risk of being satisfied to a lesser extent.

These problems are not particularly important in legal systems which are not based on the principle of universal succession and rather use a formalized procedure of first satisfying the estate’s liabilities out of the estate itself and only thereafter distributing the remainder to the heirs. In other legal systems, protection is provided by the creditors’ being able to achieve a separation of the inherited estate and the heir’s estate. This possibility, known in Roman law as separatio bonorum, is traditionally only available to the estate’s creditors, and not to the heir’s personal creditors (cf Belgium: Arts 878, 881 Code civil; Italy: Arts 512 ff Codice civile; differently now France: Art 878 Code civil new version as opposed to Art 881 Code civil old version). The principle reflected in this rule is that no creditor can be protected from his debtor accumulating further debts, even if this occurs through the acceptance of an overindebted inheritance. This explains why also German law only grants the estate’s creditors—apart from the heir—the right to apply for administration of the estate (§ 1981(2)1 BGB) which, in turn, leads to its division (see § 1984(2) BGB). The same applies to liquidation under Swiss law (Art 594 ZGB) and the so-called Absonderung under Austrian law (§ 812 ABGB). Where an acceptance subject to the benefit of inventory has been declared, a division of estates is effected in most legal systems as a result of this declaration (cf Spain: Art 1023 Código civil; Belgium: Art 802,1 Code civil; Greece: Art 1905 Greek Civil Code; France: Art 791(no 1) Code civil).

7. Conclusions

On attempting to assess the two different approaches to the liability of heirs in Europe, it will probably have to be said that the heir-friendly attitude of English and Scandinavian law goes hand-in-hand with higher costs concerning the administration and restrictions on the freedom in administering the estate. It cannot therefore be surprising that closer inspection reveals manifold and differentiated possibilities for crossing over from one mode of settlement of the estate to the other so that, in practice, the various European solutions for the problem of liability of heirs do not lie all that far apart.

Literature

Max Kollenscher, Das beneficium inventarii nach justinianischem und heutigem gemeinen Recht (1898); Walter Hallstein, ‘Schuldenhaftung des Erben’ in Franz Schlegelberger (ed), Rechtsvergleichendes Handwörterbuch für das Zivil- und Handelsrecht des In- und Auslandes, vol 6 (1938) 233; Hermann Brunck, Betrachtung des Rechtsinstituts des beneficium inventarii (1980); Michael A Schwind, ‘Liability for obligations of the inheritance’ in IECL V (1981) ch 8; Friedrich Trockels, Die Erbengemeinschaft im französischen Recht—l’indivision héréditaire et la répartition des dettes et des créances (1987); Gunter Wesener, ‘Zur Erbenhaftung in historischer Sicht’ in Festschrift Ulrich von Lübtow (1991) 113; Rembert Süß (ed), Erbrecht in Europa (2nd edn, 2008); Murad Ferid, Karl Firsching, Heinrich Dörner and Rainer Hausmann, Internationales Erbrecht, 9 vols (81st edn, 2011); Walter Pintens (ed), International Encyclopaedia of Laws: Family and Succession Law, vol 2 (looseleaf).

Retrieved from Liability of Heirs – Max-EuP 2012 on 19 May 2022.

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