Inheritance competition is a very broad topic, this article only allows me to approximate it without prejudice to what may be discussed in more detail on other occasions.
Introduction: The insolvent inheritance
Bankruptcy of inheritance is a complex procedure that is regulated by Bankruptcy Law 22/2003, of July 9, but as its name suggests, we can not ignore the civil law of succession, we must keep in mind that the competition for inheritance is assimilated to a competition for creditors, therefore, there is a clash of trains between insolvency and civil rules, where both regulations must be combined, at the same time so different.
Going into the matter, then, let us consider that we may be faced with a “poisoned” inheritance, which is nothing more than an inheritance in which there is more liability than asset, that is, the debts of the inheritance. are superior to the goods that make up the relict flow, therefore, it will become an insolvent inheritance.
Faced with this situation, everything can be complicated, especially by the heirs of this, because depending on what they do at the time of acceptance may lead to some consequences or other, for this reason it is advisable to provide prior advice from a lawyer.
It is necessary to differentiate between the insolvency of the inheritance that originates from an insolvent inheritance and the one that originates from an insolvency of creditors where the insolvent debtor has died and, when this fact occurs, the insolvency of creditors become bankruptcy of the inheritance automatically, being competent, in any case, the Commercial Judge.
Inheritance contest overview
Bankruptcy Law (LC) is based on the principle of unity from a threefold perspective: legal, disciplinary and systemic unity. Legal unit that involves containing in a single rule all the procedural and substantive aspects that address the situation of insolvency of the common debtor, thereby overcoming the previous regulatory dispersion; unit of discipline that, supposes to apply the insolvency procedure to all the debtors, is natural person –regardless of his condition of trader or no–, was legal person (art. 1.1 LC). Exceptionally it is possible in art. 1.2 LC the contest of the inheritance that, will be able to be declared – although not having legal personality – as long as it has not been accepted purely and simply. The most important thing, however, is that the common debtor – natural or legal person – or the inheritance, are insolvent, whatever the nature of the obligations that he cannot fulfill regularly; and, system unit, which means establishing a single procedure for all situations of insolvency – the insolvency of creditors – articulated in two phases: the so-called “common phase”, in which the active and passive mass is determined, through the inventory of goods; and a second, represented alternately by the agreement between creditors and common debtor, that in the case of the inheritance will be between the creditors and who represents it, or the liquidation of the patrimony of the bankrupt or the causer, with the satisfaction of the credits under the principle de par conditio creditorum .
I will make a brief analysis of the articles of the Bankruptcy Law that deal directly with the bankruptcy of the inheritance.
In art. 1.2 the subjective budget is collected, where an important limit is established and to be taken into account, it says the following:
“The inheritance contest may be declared as long as it has not been accepted for the heir or one of the heirs outright.”
Therefore, in accordance with the Bankruptcy Law, the bankruptcy may be declared in cases of lying inheritance or, the one accepted for the benefit of inventory , since if you have accepted will purely and simply answer to the debts of the causer the heirs with all their property .
If we look at what art tells us. 3.4 LC: The creditors of the deceased debtor, his heirs and the administrator of the inheritance may request the declaration of bankruptcy of the inheritance, which has not been accepted outright .
An heir’s application will have the effect of accepting the inheritance for the benefit of inventory. The period is two months from the date on which it was known or had. to know its state of insolvency, and with the requirements that are demanded in the Bankruptcy Law, being competent the Judge of the Mercantile one.
In the Civil Code of Catalonia (CCcat), art. 461-20 determines the effects of acceptance of inheritance for the benefit of inventory. This point is very important because the effects of a pure and simple acceptance to an acceptance for the benefit of inventory are very different for the heir. The heir who accepts for the benefit of inventory is not liable for the obligations of the causer or for the hereditary encumbrances with his own personal property, but is only liable for the property that arises from the inheritance. strong>
Therefore, in this case of acceptance for the benefit of inventory, the causal assets are not confused. It is clear that the rights and claims of the heir against the inheritance and the obligations of the heir in favor of the inheritance subsist.
To the detriment of the hereditary creditors or the heir, the assets of the inheritance may not be confused with those of the heir until the debts of the causer and the hereditary charges are fully settled.
However, the benefit of inventory allows the heir to acquire the inheritance, take possession of it, and administer it. However, in order for the heir to enjoy and integrate the inherited property into his personal estate, he must provide for the following:
First, the heir must pay the known creditors of the causer as they appear, under his responsibility. Next, his credits must be collected with the cash he finds in the inheritance or of what he obtains from the realization of the goods of the same inheritance, for example, the sale of a property, without prejudice to those that can award in payment of legitimacy or legacies.
Second, he may deliver and fulfill the legacies, if the causer had foreseen them.
So far it seems very clear, as it can be complicated if unknown hereditary creditors appear for the heir, that once some or all of the legacies are paid, if the hereditary balance is not enough to pay them, these unknown hereditary creditors can claim their credits to the legatees.
As for the particular creditors of the heir, they may not pursue the assets of the inheritance until all debts with the known creditors of the causer have been settled.
And just in case, the CCcat foresees that the heir who acts fraudulently in the payments and realizations of goods or of the administration of the beneficiary inheritance in general, loses the benefit of inventory, which can have very important consequences and serious as to the contest of inheritance, as we shall see later.
As I have already mentioned, when the inheritance goes into bankruptcy, the procedure that is followed is in accordance with the bankruptcy legislation, but Book IV of the CCcat refers to it in its art. 461-22, gives us a clue as to who has active legitimacy to apply for the declaration of insolvency, tells us:
“ the heir who enjoys the benefit of inventory , if the legal requirements are met, has the duty to apply for the declaration of insolvency of the inheritance >, and once declared, to proceed in accordance with the bankruptcy legislation ”.
The legislature had good intentions in anticipating the bankruptcy, but it is incomplete. This article gives us to understand or can be interpreted as the heir, as long as he has accepted for the benefit of inventory, has the duty to request before the competent court the declaration of insolvency of the inheritance. And I wonder: is only this heir legitimate? As we well know, no. There are more subjects who can apply for the declaration of bankruptcy. Therefore, at this point, although we have the bankruptcy legislation – which is not too extensive in this matter, in the procedure, as if it were a bankruptcy of more creditors, but not specifically with regard to the ‘inheritance within the competition–, I think that the Catalan legislator could have regulated it more extensively and explicitly. What he tells us is true, but incomplete.
Subjective assumption: The underlying inheritance. Accept Type
The subjective premise of the inheritance contest is the lying inheritance. When the inheritance is in a lying period and within the mass of the hereditary flow there is more passive than active, we can say that this inheritance is insolvent, because it has more debts than liquid to be able to face these and therefore, arrived at this point, the inheritance as a patrimonial mass will go into bankruptcy, which is what will be called the bankruptcy of the inheritance.
The declaration of bankruptcy will proceed in the face of any inheritance that cannot deal with its own assets, to the debts that the causer has contracted in life.
But there is an important limit, the contest of the inheritance can be declared as long as it has not been accepted outright. If the inheritance has been accepted purely and simply there will be no return and who will have to answer for the debts contracted during the life of the causer will be the heir who has accepted.
Pure and simple acceptance
Art. 461-17.1 CCcat tells us that “if the heir does not take inventory in the established time and form, it is understood that he accepts the inheritance in a pure and simple way” . The consequence is the unlimited liability of the heir for the hereditary debts, since with this modality of acceptance the heir is responsible for the obligations and the hereditary burdens, not only with the relict goods, but also with the own goods. (art.461-18 CCcat), linking with the principle of universal responsibility of art. 1911 of the Civil Code (CC) “of the fulfillment of its obligations the debtor responds with all his assets, present and future” .
Acceptance for inventory benefit
Contrary to what the CC presumes (the pure and simple acceptance of the inheritance), the CCcat seeks the defense of the heir, as provided in art. 461-17.2.
The requirements for acceptance for the benefit of inventory are regulated in art.461-15 CCcat: in terms of time, the heir has six months from when he knows or can know the denunciation. It must be formalized before a notary or in writing addressed to the competent judge (acceptance in a private document presented to the Inheritance Tax Settlement Office is also allowed), the relict assets must be indicated (no need to assess) and debts and hereditary charges, with an indication of their amount. A penalty is imposed if, with the knowledge of the heir, not all the assets and debts are included, or if it has been made in creditors’ fraud. Those interested in the inheritance and the creditors of the causer are entitled to accept for inventory benefit.
As for the effects of this type of acceptance (art. 461-20 CCcat), we see that the heir is not responsible for the obligations of the causer or for the hereditary burdens with own property, only those of the inheritance.
The rights and claims of the heir against the inheritance, of which payment can be made, and of the obligations in favor of the inheritance, remain without extinction by confusion.
Until the debts of the causer and the hereditary charges are paid, they may not be confused to the detriment of creditors of the assets of the inheritance with their own.
With respect to the form of payment, hereditary goods may be sold to satisfy monetary obligations; or by donations in payment.
When the heir commits fraud to the detriment of the creditors, art. 461-15.4 CCcat establishes the loss of the inventory benefit as a sanction.
The heir who enjoys the benefit of inventory, if the legal requirements are met, has the duty to request the declaration of insolvency of the inheritance, and once declared, to proceed in accordance with the insolvency legislation (art. 461-22 CCcat).
Target budget: Insolvency
The objective budget of the inheritance competition is insolvency. As I mentioned in the previous section, inheritance with debts becomes insolvent when these debts cannot be covered with the assets of the hereditary flow.
In order to shell out assets and liabilities from any estate, an inventory must be made into which assets and liabilities will be divided. The asset is made up of all the assets that are not taxed or have any encumbrances. Liabilities are the charges on the assets and debts that the causer would have left unpaid before he died.
Therefore, the declaration of insolvency will proceed in case of insolvency of the inheritance . It is in a state of insolvency the inheritance that cannot fulfill its due obligations, that is to say, causing debtor that could not fulfill regularly its due obligations and therefore, once it dies these obligations happen to comprise of the liabilities of the hereditary flow.
Applicants for bankruptcy must justify their indebtedness and state of insolvency, which must be current and imminent. The inheritance is expected to be in imminent insolvency and is expected to fail to meet its obligations at the time of its liquidation.
The current Bankruptcy Law, like the previous legislation, continues to leave many legal gaps regarding the bankruptcy of the inheritance, and the Catalan civil regulations relating to the Law of Succession – nor the state one – do not include any provision that in accordance with bankruptcy set up the procedure for the inheritance and content endowment so that it alone can address the issues that arise in this regard.
One of the most controversial points is that in the bankruptcy of the inheritance , like a bankruptcy, the bankruptcy administration will be responsible for exercising the patrimonial powers of administration and provision on the relict flow –and as the law expressly mentions– without this situation being able to change, but we cannot go into it as this would already give rise to a much more extensive article and should not be extended further.
Thus, it is clear that the existing regulation is insufficient. The Bankruptcy Law does not provide solutions to the problem of inheritance insolvency, it has many shortcomings that can be justified since the purpose of the law is not to solve inheritance problems, but bankruptcy. But we cannot settle for this justification, we need more specific regulation.
Also, in practice, there are no real cases, so not much attention is paid to the study of this subtype of bankruptcy, but when there are any, neither courts nor the various legal operators involved in cases of Bankruptcy creditors have doubts about how to proceed.
The inclusion of a new Title within the Bankruptcy Law could be reconsidered, encompassing all the precepts that speak of the contest of inheritance, giving form and coherence to the process. It would be a combination of succession and bankruptcy rules that could be very interesting.
Maria de Montserrat Romaguera i Edo
Member of the Catalan Association of Specialists in Inheritance Law
THE INHERITANCE API AND CONTEST
The work of celery in the face of a situation of financial insolvency is vital. Decision making needs to be fast. The first of the precautions is to know the value of the patrimonial assets: in front of an patrimony in which the liability is superior to the assets, immediate renunciation to the inheritance; in the event that the asset is higher than the liability (and it is wholly or partly in arrears) you can accept the inheritance but with caution, you must know the nature of the liability, the executive nature of certain obligations, the its amount and its maturity. In any case, the inheritance must be accepted for the benefit of inventory.
Accepting the inheritance for the benefit of inventory, and finding the inheritance in a situation of insolvency, understood this as the impossibility to take care of the ordinary obligations of the same, a bankruptcy of creditors of the inheritance must be presented , as previously mentioned by her partner, Maria de Montserrat. Therefore, it is not an option it is an obligation.
And celery is no stranger to this process, as it can intervene at different times:
- In the beginning, valuing the properties that are part of the assets of the inheritance.
- Intermediate in the search for buyers for certain elements of the assets of the inheritance that allow sufficient cash to meet the liabilities of the same and get out of the situation of insolvency.
- At the request of the insolvency administration in order to determine the active mass of the insolvency, or the insolvent, to challenge the value of the real estate donated by the insolvency administration in the inventory of property and rights. li>
- Sale of productive unit, presenting offers for the acquisition of productive unit.
- Agreement phase, intermediary in the sale of certain assets with which to obtain cash to meet the payments committed in it.
- In the liquidation phase, either through the management of the sale of real estate commissioned by the insolvency administration, or through the presentation of purchase offers within the stipulations of the Liquidation Plan, or through the contribution of buyers in the public auction of the same.
The detection of the situation of patrimonial insolvency in time, the knowledge of the current legislation and the adequate answer, allows the celery to give a service of great quality with high added value to its client, being present of active way in the different stages of the process defending the best possible price.
RAFAEL CASTILLA ÁLVAREZ
Vice President COAPI Barcelona