Have you inherited a property, but instead of joy, the inheritance mainly brings worries due to high debts? This scenario is a reality for over 30% of heirs in Germany. We show you how to systematically proceed to avoid liability with your personal assets and regain control.
Chat with ImmoGPT for free now.
With access to Google, BORIS, and Deep Research.
The topic briefly and concisely
You have only six weeks to renounce an inheritance; otherwise, you will be liable with your personal assets.
An accurate balance of property value and all debts is the basis for any decision.
Estate administration or estate insolvency are effective procedures to limit your liability to the estate.
An inherited property with debts presents many heirs with an emotional and financial ordeal. The fear of having to be liable for the deceased's debts with one's own assets is significant and often justified. According to § 1967 BGB, heirs are generally liable for estate liabilities. However, there are clear legal avenues to protect your private assets. This guide provides you with a structured 4-step plan, from the crucial 6-week deadline to the options of sale or estate insolvency. This way, you can turn uncertainty into a clear, data-driven decision.
Step 1: Check the 6-week period for disclaiming an inheritance
Faced with a potentially debt-laden property, your first and most important deadline is the disclaimer of inheritance. From the time you become aware of the inheritance, you have exactly six weeks to disclaim it at the probate court (§ 1944 BGB). If you miss this deadline, the inheritance with all rights and obligations – including debts – is considered accepted. Disclaiming an inheritance typically costs between 30 and 150 euros in notary and court fees. This small investment can save you from tens of thousands of euros in debt. A hasty acceptance, such as applying for a certificate of inheritance, makes the decision irreversible. Therefore, a quick and precise analysis is the first step before you take further actions regarding the inherited property. This analysis forms the basis for the next crucial step: the precise assessment of assets and debts.
Step 2: Accurately balance assets and liabilities
To make an informed decision, you need to determine the true value of the estate. This means offsetting all assets against all liabilities. Simply considering the mortgage in the land register is not sufficient, as the actual outstanding balance is often 20-40% lower. List all items in detail:
Assets: The current market value of the property is the largest item. Additionally, any bank balances, securities, or other valuables of the deceased are included.
Liabilities: This includes the outstanding balance of the mortgage, mortgages, unpaid bills of the deceased, and any inheritance-related costs such as funeral expenses averaging between 8,000 and 12,000 euros.
A professional property valuation is essential here. It provides an objective market value that serves as the basis for all further considerations. With the free ImmoGPT from Auctoa, you receive an initial, data-supported assessment in just a few minutes. This balance determines whether you accept the inheritance or if a liability limitation becomes necessary.
Step 3: Actively limit liability on the estate
Estate Administration as the First Protective Measure
If you have accepted the inheritance and only afterwards discover an over-indebtedness, you must act to protect your personal assets. Estate administration, applied for at the probate court, is an option if the estate is sufficient to cover the proceedings costs (court, estate administrator). The estate administrator settles the debts from the estate's assets. Your advantage: Your liability is limited to the estate in accordance with § 1975 BGB. Any surplus after deducting all costs and debts is paid out to you. This procedure is suitable in cases of complex asset situations and protects you from creditors accessing your own money. Clarify beforehand whether you have correctly assessed the property's value to ensure cost coverage.
Estate Insolvency as a Last Resort
If the inheritance is insufficient to even cover the costs of estate administration, estate insolvency is the right path. You must file this application “immediately” once you become aware of the estate's insolvency or over-indebtedness. The costs for insolvency proceedings are also paid out of the estate. If the estate is insufficient to cover these costs, the procedure is dismissed due to “insufficient funds,” which serves as proof to creditors. Again, liability is effectively limited to the estate. This procedure is often the only way to draw a clear line when debts are overwhelming.
Step 4: Strategic Options for the Indebted Property
If the liability is clarified, the question arises: What to do with the property itself? There are three core strategies, whose suitability directly depends on the outcome of your balance sheet from Step 2.
Sale for debt repayment: If the market value of the property exceeds the debts, selling is often the most sensible solution. The proceeds are used to settle all creditors. Any surplus, for instance, €25,000 after sale and repayment, is yours as profit.
Negotiations with the bank: If the value is just below or equal to the debts, engage in discussions with the financing bank. Banks are often interested in a cooperative solution and agree to a private sale, as this usually achieves a higher return than a foreclosure auction.
Partition auction in the inheritance community: If co-heirs cannot agree, a partition auction threatens. This should be avoided as the returns here are often 15-30% below the market value. A neutral valuation serves as a decision aid for the inheritance community and provides a common factual basis.
Each of these options requires a precise understanding of the property's value and the level of debt. Only in this way can you make the best economic decision and avoid financial losses.
Conclusion: Control through proactive action and data
An inherited mortgaged property is a serious challenge, but not an insurmountable situation. The key lies in taking swift, structured action within the first six weeks. An impartial assessment of assets and liabilities is fundamental for any further decision, whether that is relinquishment, sale, or a procedure for liability limitation. Do not ignore the problem, as inaction automatically leads to the acceptance of the inheritance and full personal liability. Use legal protective mechanisms and data-driven tools to safeguard your personal assets. A well-founded assessment provides you with the necessary confidence to take the right steps and maintain financial control.
was-tun-bei-geerbter-verschuldeter-immobilie
Additional useful links
The Verbraucherzentrale comprehensively explains what to consider when renouncing an inheritance.
Haufe examines the liability of heirs in the context of inheritance law.
The JurAcademy provides detailed information on estate liabilities.
FAQ
Do I have to sell the property if there are debts on it?
Not necessarily. If you have the financial means, you can settle the debt from your own resources and keep the property. However, selling is often the simplest solution to settle liabilities and achieve a clean outcome, especially if the value of the property exceeds the debt.
What does an estate insolvency cost?
The costs of an estate insolvency consist of court fees and the remuneration for the insolvency administrator. These are paid from the estate. If the estate is insufficient, the application is often rejected 'for lack of funds', which nevertheless serves as proof of insolvency to creditors.
Can I rent out a mortgaged property instead of selling it?
Yes, that is an option if the rental income covers the ongoing costs (loan repayments, utilities, maintenance). This requires careful calculation. Keep in mind that as a landlord, you remain responsible for the property and the debts. An <a href="/blog/geerbtes-haus-verkaufen-oder-vermieten-rechner">accurate calculation of selling versus renting</a> is advisable here.
What is the difference between estate administration and estate insolvency?
Estate administration is used in cases of a complex yet potentially valuable estate to satisfy creditors. The insolvency of the estate is the correct procedure in cases of established insolvency. Both serve the purpose of limiting the heir's liability to the estate.
Is inheritance tax applicable to a mortgaged property?
Inheritance tax is calculated on the net estate value. This means debts are deducted from the property's value. If the estate is insolvent, typically no inheritance tax is due. For peace of mind, use an <a href="/blog/erbschaftssteuer-fur-immobilie-vorab-online-kalkulieren">inheritance tax calculator</a> to get an initial indication.
What happens to the property in a community of heirs with debts?
The community of heirs must jointly decide how to proceed with the indebted property. Options include a joint sale, acquisition by one heir (who pays out the others and takes over the debts), or in case of dispute, a partition sale. All heirs are jointly and severally liable for the debts.
