How Is Liquidation of an Estate Done

Summary

Liquidation of an estate: the steps

The specific formalities of estate liquidation

Liquidation of an estate: the cost

Claims in the liquidation of an estate

The liquidation of an estate involves four main stages. The processing time, which depends significantly on the particularities of the case, is, on average, six months from the date of death.

The six-month period is the maximum time limit imposed on heirs to pay estate taxes. In case of delay in filing the inheritance tax return, the interest of 0.40% per month is due to the tax authorities (an additional 10% penalty is due if the delay exceeds six months).

Liquidation of the estate: the steps

The first step of the liquidation of the estate: the notarial deed

The notary establishes the persons who will inherit the estate and their respective rights.

To do this, the deceased’s relatives must provide the documents that identify the members of the deceased’s family concerned by the succession:

• family record book;
• birth certificates;
• marriage certificates;
• marriage contracts, if any;
• divorce decree, if any.

The documents in which the deceased would have designated one or more persons to receive all or part of his estate must also be submitted: will and donations.

At the same time, the notary also queries the Fichier central des dispositions des dernières volontés.

Second step: the estate assessment

The notary then draws up a complete list of the deceased’s assets (bank accounts, securities, furniture, real estate) and their value. He also lists the debts.

For the notary to do this work, you must provide him with all the documents (property deeds, bank statements, savings books, invoices, etc.) that allow him to evaluate the assets and liabilities of the estate. It is also necessary to indicate the various operations carried out in the past by the deceased (purchases, sales, exchanges, incorporation of companies, donations, etc.).

Then, once this balance sheet has been drawn up, the notary draws up a simple statement of assets or has an inventory drawn up, depending on the case.

Third step: mortgage and tax formalities

During this third step, the notary carries out the mortgage and tax formalities related to the death. This means:

he establishes and publishes a real estate certificate for the buildings at the Service de la publicité foncière (previously called the Conservation des hypothèques);

that he/she draws up the declaration of inheritance to which he/she attaches, if applicable, the payment of inheritance tax due.

Good to know: the payment of the inheritance tax must be made within six months of the death to the tax office of the deceased’s place of residence. If these taxes are high, the heirs responsible for them can request deferred or split payment.

At this stage, the heirs of the deceased may or may not decide to share the property, either totally or partially.

Final stage: division

The heirs may decide not to share: they are then said to be in indivision.

But if this indivision is deemed too restrictive, financially and humanly, the heirs of the deceased can ask for the division of the property. In principle, this can be requested at any time, and most often, it is done amicably.

In case of serious disagreement on the composition of the lots or their valuation, it is necessary to address the judge, which entails additional delays and costs.

Special formalities for the liquidation of an estate

The presence of a minor child or a protected adult (under guardianship) among the heirs may require the family council to be convened, the guardianship judge to be consulted, or their authorization to be obtained. Thus, several additional months may be required to complete these mandatory formalities.

Good to know: the tax authorities grant tolerance to the obligation to file the declaration of inheritance within six months of the death in the case justified, where such steps are necessary.

Some assets require special procedures: businesses, farms, and companies whose operations must be maintained or transferred. Thus, the appointment of an expert or a judicial administrator is sometimes necessary and also increases the duration and cost of the file.

The search for an unknown heir or legatee requires using a genealogy firm, which investigates unpredictable duration.

Other factors also have an impact on the progress of the liquidation of an estate:

• the agreement or disagreement between the heirs of the deceased;
• the size of the deceased’s assets or debts;
• the presence of foreign heirs or property located abroad.

All of these elements directly influence the file’s processing time and can impact the estate settlement’s cost.

Estate settlement: the cost

The settlement of an estate has a variable cost. The notary can only evaluate the cost after obtaining essential information, such as the assets’ amount and the liabilities’ estimate.

There are three types of costs associated with the settlement of an estate

taxes owed to the government: inheritance tax of 5% to 60% depending on the degree of kinship and the amount of property passed on; stamp duty; value-added tax; 

disbursements, which include the cost of certain mandatory documents requested by the notary, the real estate security contribution in the case of real estate transfers (previously called the salary of the mortgage registrar);

the notary’s remuneration is established according to a tariff set by the State.

Cases of claims in the liquidation of the estate

There are several cases of claims in the liquidation of an estate. An heir may claim an estate for ten years instead of thirty years.

At the end of four months after the death, the notary may issue a summons to the silent heir to make a statement.

The heirs can perform specific day-to-day management and administration (paying the rent, paying bills) without being held to accept the estate, i.e. without the risk of personally bearing all the liabilities. Thus, in the event of discovering unforeseen liabilities that seriously affect the heir’s assets, the court may authorize the heir to withdraw his acceptance.

The procedure of acceptance up to the net assets allows the heir to be liable for the debts only up to the limit of the assets transmitted.

Concerning undivided ownership, the two-thirds majority rule replaces the unanimity rule for the most straightforward decisions.

In order to achieve the division of the estate’s assets, a proxy may be appointed to replace the undivided co-owner who does not respond to the requests of his co-heirs.

Finally, in the event of profound disagreement between the heirs, a judicial representative may be appointed, with the powers that the court will decide to confer on him or her, which may go as far as the sale of the estate’s assets.