How to protect your personal assets from debts associated with an Italian inheritance
At De Tullio Law Firm, we understand that when a loved one dies there are many issues that need attention at an extremely difficult time. Having to make funeral arrangements, notifying friends and family and the grieving process.
On top of this, there are also critical legal matters that require consideration.
If your loved one left assets not only at home but also in Italy, estate administration is more complex. As cross border legal specialists in Italy, this is an area in which our legal team can help. Should you wish to discuss your situation with us, please get in touch.
Italian estate inheritance options available to heirs
Inheritance consists of assets (moveable and immovable property) and liabilities (debts).
Italian law stipulates that an heir becomes responsible for settling any debts the decedent may have left.
The acceptance of an inheritance sometimes presents a risk. If the value of assets included in the inheritance is less than liabilities, heirs are responsible for settling debts from their personal finances.
In Italy, inheritance always requires acceptance or refusal. Italian law provides three inheritance options in this regard.
Unconditional acceptance of the inheritance
An heir inherits all the assets subject to succession. The beneficiary assumes personal liability for the decedent’s liabilities, even if debts exceed the value of the assets. An heir therefore becomes liable in a personal capacity (with their own finances) for any portion of the decedent’s debts that the inheritance does not cover.
Refusal of the inheritance
This means an heir completely renounces the succession. In effect, an heir renounces all rights to the inheritance. The statutory arrangement is that the share of inheritance is then subject to a ‘right of representation’. Thus it passes to an heir’s children, and if there are no children, to any other heirs.
Acceptance under the benefit of inventory (accettazione con beneficio di inventario)
This is usually the best option if you are uncertain whether the inheritance comprises debts and other succession charges.
What is the acceptance of inheritance under benefit of inventory?
According to Article 490 of the Italian Civil Code, acceptance under the benefit of inventory is an act by which a person declares the acceptance of inheritance but wants to protect personal assets from becoming entwined with those of the deceased.
Usually, the assets of the heir and that of the deceased are merged into one, so not only does the heir inherit movable and immovable assets, but also any debts and liabilities.
Whoever accepts an inheritance must settle debts, so caution is advised. In order to protect an heir’s personal assets, the acceptance of the succession is subject to a condition, the benefit of inventory. This permits the heir to assess what the inheritance actually comprises before deciding whether or not to accept it.
There is no obligation for an heir to accept the inheritance. Drawing up an inventory of debts and assets allows the heir to make an informed decision about the inheritance: either to accept and pay debts from the assets inherited, or to refuse the inheritance because debts outweigh inherited assets.
Effects of acceptance under benefit of inventory
The first advantage is that the estate of the deceased remains distinct from the estate of the heir. In essence, this means that an heir does not have pay the decedent’s debts for a value greater than that of the inherited assets. In addition, creditors cannot recoup any debts from the heir’s personal assets.
How to accept the inheritance under the benefit of inventory
To accept an inheritance using the benefit of inventory, there are some fundamental requirements. Article 490 of the Italian Civil Code covers the procedure.
Firstly an heir has to file a declaration written in Italian, with a notary or a clerk of court in the locality where the succession procedure is taking place. Secondly, a detailed inventory of all the assets belonging to the inheritance is necessary.
Within a month of filing the above mentioned declaration, the notary or clerk must transcribe it in the relevant land registries. This transcription then permits the heir to pay the creditors and the bequests.
If you are in the difficult situation of considering whether to refuse or accept an Italian inheritance, using the option of benefit of inventory may be the way forward for you.
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