Inheriting property– a credit, a headache, a solution!
Date: 26th January, 2011
The following article by Dr Krystyna Grima discusses salient points relating to Maltese succession law when inheriting property. It was published in the "Property and Construction" Section of the Times of Malta.
Inheriting property– a credit, a headache, a solution!
When a person dies, his heirs begin to go through the estate with a fine tooth comb to determine how and when it may be divided, what they are entitled to and IF it makes sense to partake in their share, and whether any tax shall be incurred on acceptance.
Property may be disposed of either by will (testate) or by operation of law (intestate). In testate succession, the law protects the interests of both the spouse and children of the deceased, ensuring that they will always partake in the inheritance, even if the testator has excluded them from the will. This is translated to the reserved portion which is a fixed part of the estate granted to children/descendants and surviving spouse and which therefore cannot be freely disposed of by the testator. The law allocates to children, one-third of the value of the estate where there are not more than four and one-half of the value if there are more than five, whilst the spouse shall be entitled to one-fourth of the value of the estate in full ownership and where there are no children, to one third.
Where testamentary dispositions exceed the disposable portion of the estate (the part of the estate less the reserved portion), abatement kicks in – this is a process by which the disposable portion of the estate is calculated in order to determine whether it exceeds the reserved portion so that in such event, it is lessened proportionately without any distinction between the heirs.
In the event that a person dies intestate, few problems should arise as to how the estate is to be divided in that the law simply allocates half the estate to the children in equal shares and half to the spouse, allowing the spouse the right of habitation of the matrimonial home and use of all furniture within the said tenement – as would be the case even if a person died testate. If the deceased has left children or other descendants but no spouse, the succession devolves upon each of them and vice-versa. Where neither children nor a spouse is left to succeed, then succession shall devolve to the nearest ascendant if the deceased did not have any siblings or their descendants and vice-versa; half to the nearest ascendant and half to the siblings if both existed at the time of death; to the nearest collateral if the deceased had neither siblings nor ascendants; and to Government if the deceased was not survived by any of the above.
Accepting inheritance may be tacit, which warrants an act of acceptance, or express, which necessitates a public deed or private writing and may be done within ten years from the date of the decease. Though acceptance may seem like the silver lining to an otherwise morbid predicament, when the estate of the deceased is encumbered with burdens such as loans, hypothecs, and other debts which exceed the value of the estate, renouncing may be in the best interest of the heirs as the burdens continue to attach even after death so that whoever accepts the inheritance, acquires all assets and liabilities. This ultimately means that the personal property of the person accepting shall have to make good whatever liabilities are left over after the inheritance has been exhausted. Where the debt attached to the property is insignificant when compared to the value of the estate, it would make sense to accept. If, on the other hand, there is doubt as to whether an heir should accept, the law permits such person to make an informed decision without the pressure of unconditional acceptance by providing for acceptance with the benefit of inventory. This means that although the heir has not accepted unconditionally, he is allowed a period of 40 days by law to deliberate whether to accept or renounce the inheritance, on completion of the inventory, and if after such time he has not made a declaration renouncing thereto, he shall be deemed to have accepted with the benefit of inventory.
When inheritance is accepted, the property forming part thereof is transferred to the heir. With regard to immovable property and shares in a company not on the Malta Stock Exchange, this transfer requires a declaration causa mortis to that effect; which shall be made by public deed and subjected to duty on documents. The general rule is that on every declaration causa mortis, a duty of 5% of the value of the property/amount of consideration, whichever is higher, shall be paid thereon. This 5% rule applies to all such property; barring certain exceptions – and on this advice is recommended.
From the above, one could only begin to grasp the possible complexities involved in inheriting property and the rights which both the spouse and children of the deceased are granted by law. It is therefore recommended that people make a will during their lifetime with clear, fair and all-encompassing testamentary dispositions in order to avoid unnecessary litigation concerning the inheritance.
