Liability for the debts of the deceased in German law
Zuletzt aktualisiert: 12.11.2018 | Autor: Gaius-Redaktion
German law requires beneficiaries to take on personal liability for the debts of the deceased. This means that if a person passes away with more debt than the value of their estate, their beneficiary is required to pay any of the remaining debts out of their own pockets. Of course, there aren’t going to be that many beneficiaries out there who want to take on a liability as an inheritance. That is unless they wish to hide the fact that the deceased was in debt. Most of the time, however, beneficiaries would rather renounce the inheritance entirely.
It’s pretty easy for a beneficiary to make the decision of whether or not they want to renounce the inheritance if they know that they will be taking on debt. However, it isn’t always clear whether or not the estate is indebted. The beneficiary only has six weeks (or six months if they are located overseas) to make the decision to accept or renounce the inheritance.
So what do you do if it isn’t clear whether or not the estate is indebted?
In cases where beneficiaries are not sure whether or not the estate is indebted, an alternative to renouncing the entire estate is the “Aufgebotsverfahren”. This means that all the creditors of the estate are requested by the executor or beneficiaries to come forward and state their claim. This allows the beneficiaries to estimate the liabilities that the deceased had. Besides the improved estimate of debt, there is also the advantage of creditors losing their claims if they fail to register before the deadline in the case that the assets are unable to cover the liabilities.
The “Aufgebotsverfahren” is comparable to the way executors under English law are able to protect themselves by advertising similar notices in the London Gazette and other local newspapers. That being said, the German procedure is a lot more formal because they apply the principle of universal succession.
How does the executor or beneficiary of an estate give a public notice to creditors?
To start the public notice process, the beneficiary or executor of the estate files to start the Public Creditor Notification Proceedings at the German Local Court (“Amtsgericht”). They must provide a list of every creditor that they know of.
After the Public Notification Proceedings have begun, the creditors, also known as the “Nachlassgläubiger” are given some time to file their claims. The deadline is set at no less than six weeks. Afterward, the German Local Court will issue a Preclusion Order to close the period of time that claims can be filed.
After the Preclusion Order has been issued and the deadline has officially passed, the executor and beneficiaries of the estate have a good idea of the liabilities of the estate. They can then make the decision of whether or not to renounce the inheritance. If they choose to accept it, the liabilities that they take on will be limited to the value of the estate. Any debt discovered after this point will not be passed on to the beneficiary.
Claims filed by creditors after the deadline are not completely pointless. They are still liabilities that have to be paid whether or not a Public Notification Proceeding is initiated. That being said, the amount to be paid back is limited to the value of the estate. If the assets have been exhausted by claims filed within the period, the beneficiary can refuse to pay the debt. The Aufgebotsverfahren holds that beneficiaries must pay the debt if the estate still has value remaining after all other claims filed have been paid.
The Aufgebotsverfahren is an important alternative that many executors and beneficiaries choose if they are not sure whether or not the estate is indebted. It does not guarantee that the beneficiaries will get the assets, but it does guarantee that if creditors come knocking, they won’t have to pay anything out of their own pocket.