Understand what Brazilian legislation says; Credit: iStock/Doucefleur
When the subject is heritageassets and property that can be passed down from generation to generation usually come to mind. But what about when this asset is “negative”, that is, it is made up of debts?
You can rest assured: after all, according to Brazilian legislation, debts do not affect the personal assets of children, or in this case, heirs. However, if the deceased person's debts do not affect his or her estate, who pays the bill?
Well, in this case, as described in article 796 of the Code of Civil Procedure, it is the deceased person's estate (called “estate”) who will be responsible for paying outstanding debts. See what the law says:
Code of Civil Procedure – Law No. 13,105, of March 16, 2015.
Art. 796. The estate is liable for the deceased's debtsbut, once the division has been made, each heir is responsible for them within the limits of the inheritance and in proportion to the share that fell to him.
Estate greater than, equal to or less than debts: what happens in each case?
According to the rules of the Civil Code, if the debts have a lower value to the deceased's estate, they will be paid off; and the remainder will be divided among the heirs.
If the debt is already equal to the value from the deceased's estate, it will also be paid. However, the heirs will be left without an inheritance.
What if the debt exceeds the estate?
Even in this situation, the heirs are not obliged to pay it out of their own pocket. See:
Civil Code – Law No. 10,406, of January 10, 2002.
Art. 1.792. The heir is not liable for charges exceeding the limits of the inheritance; however, it is his responsibility to prove the excess, unless there is an inventory that excuses it, demonstrating the value of the inherited assets.
In this case, the expense will be partially paid from the deceased's total assets, and the heirs will not receive any inheritance.
Therefore, the remainder of the debt becomes a loss to the creditor. Check out some situations in which this principle is applied:
Debts with real estate financing
In Brazil, the lender insurance It is mandatory in housing finance contracts. And it is a good thing, because it is this insurance that guarantees the payment of the installments of a loan in the event of the death of a contractor.
In other words, if the debtor dies, the heirs will not need to finish paying off the financing and will still have the right to possession of the property.
Lender insurance can also be used to cover installment payments for purchases of movable goods in retail, vehicle financing, consortia and loans from financial institutions, although it is not mandatory in these cases.
Furthermore, it is worth remembering that the greater the risk of death, as in the case of elderly people, the more expensive the insurance will be, and the insurer may even refuse to offer coverage, depending on the amount of the debt and the term of the installments.
Vehicle financing debts
As previously stated, with the exception of housing finance, it is not mandatory to take out insurance for other types of financing and loans.
Therefore, in the absence of a loan insurance policy, the debts will be deducted from the deceased's estate, as described in the legislation. In fact, the vehicle itself can be used to pay the debt.
However, if the vehicle is transferred during the lifetime to one of the heirs, the situation changes: in this case, it is the heir's responsibility to pay off the remaining financing.
Tax debts (IPTU, IPVA)
Tax debts, such as IPTU and IPVA, are the responsibility of the estate.
However, if any heir ends up with an asset from the estate (real estate or vehicle), he or she will have to assume responsibility for paying these taxes to transfer it to his or her name.
Credit Card Debt
If the deceased leaves debt on his or her credit card, the responsibility for payment falls on the estate, not the heirs.
However, it is important that the deceased's credit cards and bank accounts are closed as soon as possible to avoid generating new debts.
Still have questions? Access exclusive and free material with everything you need to know about inheritance
Although it is a delicate subject, knowing the general rules for the transfer of assets and division of inheritance in Brazil they help to save several headaches in the future.
That's why personal finance specialist reporter Júlia Wiltgen, also known as The Moneymakerspoke with a team of lawyers specialized in estate succession and prepared a exclusive guide to answer all your questions about inheritance.
And you can access the material for free, as courtesy from Your Money, a partner portal of Money Times.
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