Judicial Liquidation of an Inheritance in Cases of Temporary Heir Due to Minority

Legal Insight

November 2024

Danae Stamarga, LL.M.

Summary: Following the introduction of Article 35 of Law 4786/2021, which extends the timeframe minors have to decide whether to renounce an inheritance until one year after reaching adulthood, a practical issue arises. This prolonged period creates uncertainty in transactions, especially concerning creditors of the estate, as they are unable to pursue claims against the minor (who has not yet become a definitive heir) throughout this extended renunciation period. In this article, we explore whether judicial liquidation of the inheritance could address these issues.

1. Introduction: Succession, Benefit of Inventory, and Judicial Liquidation of Inheritance

When an individual dies, their estate (including both assets and liabilities) passes to their heirs. Once heirs accept the inheritance, it merges with their personal assets, meaning personal creditors can seek satisfaction from both the individual and inherited assets. Similarly, the heir is liable with their own assets for the estate's debts, allowing estate creditors to satisfy claims from both the inherited and personal assets.

However, if the heir accepts the inheritance with the benefit of inventory, their liability is limited to the estate's value. In any case, the institution of judicial liquidation of inheritance allows estate creditors (mainly those of the deceased) to satisfy claims from estate assets ahead of the heir’s personal creditors. Judicial liquidation protects estate creditors from competing with the heir’s personal creditors and from potential mismanagement by the heir.

2. Need for Protection of Estate Creditors - Especially in Cases Involving Minor Heirs

As noted, judicial liquidation can be requested by any estate creditor in cases where doubts exist regarding the satisfaction of their claim. Such concerns might arise due to the heir’s financial instability, inadequate estate assets, or the heir’s mismanagement. Judicial liquidation may also be requested when the estate is inherited by a minor, who now, under Article 35 of Law 4786/2021, has the right to renounce the inheritance within a year after reaching adulthood.

The result is a prolonged period of uncertainty, particularly when the heir has not yet been born at the deceased’s time of death. In these cases, the renunciation period may extend up to 19 years after the death, posing significant risks for estate creditors. Judicial liquidation, therefore, may be necessary to prevent creditors from potentially losing their claims due to statute limitations during this extended period.

3. Judicial Liquidation of the Inheritance - Process and Consequences

In the above situations, any estate creditor with doubts about their claim’s satisfaction can apply for judicial liquidation, requesting a liquidator to manage the estate assets and prioritize creditors’ claims. Creditors eligible to apply include those with claims that arose upon succession, such as funeral expenses or taxes.

Once the court orders judicial liquidation, the liquidator must publicize a summary of the order, inviting estate creditors to submit their claims. The liquidator manages the estate to satisfy verified claims, potentially liquidating estate assets, and ultimately prepares an inventory of assets and liabilities. If the assets suffice to cover the debts, the liquidator pays creditors in full, satisfies remaining claims, and delivers any residual assets to the heir.

4. Conclusion

With the introduction of Article 35 of Law 4786/2021, which may extend renunciation periods to as much as 19 years, the role of judicial liquidation becomes crucial. It provides a means of ensuring security in transactions by protecting creditors’ rights during prolonged periods of inheritance uncertainty.