What happens with the debt of a deceased person in Peru?
A classic case of this situation is when a person receives an inheritance consisting mainly of real estate, so that he/she will have a high taxation in the ISD and in the Tax on the Increase in Value of Urban Land (the municipal capital gain). And as there are no other liquid assets in the estate (neither bank deposits nor shares or investment funds), there is no cash to pay such taxes within the six months term granted by the Law for such purpose.
Well, when among the assets received in inheritance there is not enough cash to settle the tax debt, it is possible to file the Inheritance and Gift Tax return and request a specific deferral for these cases. Thus, even if the tax has not been paid, it will be possible to register the change of ownership of the properties in the Land Registry, and sell those that are necessary to definitively pay the debt.
And if you still have no choice but to sell any of them, you will not have to do it in a hurry, but you will be able to wait until the economic situation improves and you can obtain a higher price.
Inherited debts examples
We know that it is a very complicated situation, but the heirs must take into account that there is a term fixed in the law to liquidate the inheritance tax. This term is 6 months and starts counting from the moment of the death of the deceased. There is the option of requesting an extension of another 6 months to be able to liquidate it, but it must be requested within the first 5 months.
There is only one situation in which the heirs do not have to pay the inheritance tax and that is when the inheritance is renounced purely and simply. In all other cases, this tax must be paid. Also, if there is a house in the inheritance, the municipal capital gains tax must be paid. The term to pay the municipal capital gains tax when it is produced by mortis causa is, likewise, of 6 months from the death of the deceased -if the capital gains tax is paid by donation or sale the term is 30 days-.
In line with the above, when we face an inheritance for the first time without previous knowledge, it may entail the acceptance of an inheritance with numerous debts that the heir will have to assume as his own once the inheritance is accepted and distributed.
What happens to the debt of a deceased person?
This point is of vital importance. When a person dies, he/she leaves all his/her material goods (clothes, bed, appliances, property, checking account money, etc.), but along with all of the above, he/she also leaves debts. Yes, debts, as well as material goods, are inherited.
We already know that when a person dies, another person inherits the assets (and debts), but who is entitled to receive that inheritance? This will depend on the type of inheritance. In Chile there are two types of inheritance, the one that is governed by a will and the automatic one, that is to say, the one that does not have a will. Let us review each one below.
As its name indicates, here there is no will, that is to say that the person who passed away did not leave any instructions as to whom his or her things should be distributed to. Since there are no instructions, the law is the one who establishes the persons who will receive the inheritance and how it will be distributed.
This group includes all the people to whom the deceased person left part of his or her property through a will. This could also include his direct and indirect relatives, but also friends, acquaintances or any other person that he considered deserved to receive part of his estate.
If there is no inheritance, debts are inherited
An inheritance is the reflection of a person’s will for his or her assets. Or at least it should be. Every time a person dies, the process of inheritance begins. From housing to cash and even investment funds, the inheritance will distribute everything that person had.
The inheritance process can be tedious and complex. That is why it is important to be clear about how inheritances work, what processes they follow and the inheritance taxes you will pay in each case. To begin with, the procedures will be different if there is a will or not. In fact, this document greatly simplifies the paperwork.
First of all, you have to know what to do with the inheritance. If you are at a loss, the best thing to do is to consult an independent financial advisor, who will help you make the most of this money. You can find an advisor here or by filling out the form below. After a brief study, we will put you in touch with the one that best suits your needs.