July 13, 2026, 1:17 pm | Read time: 4 minutes
Parents want only the best for their children. Accordingly, property owners prefer to pass on their real estate to their offspring once it’s paid off. But what about the legal situation? Can properties that haven’t been fully paid off be inherited? And what happens if the inheritance is declined–who then takes on the debt? myHOMEBOOK spoke with a lawyer about this.
Follow myHOMEBOOK on WhatsApp now
Are debts also inherited?
“When a property is inherited that still has a mortgage, the debts are generally inherited as well,” says lawyer Nicole Mutschke. After all, an inheritance includes not only assets but also the debts themselves.
What options do potential heirs have in this case?
Not everyone who inherits a property wants to take on the associated debts. A house is a significant financial burden that requires careful consideration. It’s understandable that survivors take time to decide whether they want to accept the property along with its debts. However, heirs shouldn’t take too long. They have three options for handling this inheritance:
- The inheritance can be accepted: This makes sense, especially if the inherited debts are significantly lower than the property’s value. In this case, accepting the inheritance is a long-term investment.
- The inheritance can be declined: “If the estate is overall insolvent or economically disadvantageous, the heir can decline the inheritance within six weeks,” explains Nicole Mutschke. If the debts exceed the property’s value, the inheritance offers no financial benefit. Thus, the inheritance can be rejected within a six-week period at the competent probate court.
- Apply for estate insolvency: Heirs can separate the inheritance from their private assets. If the deceased’s debts cannot be paid off in the long run, the heir is not liable with their private assets.
It’s important to note: Those who wish to decline the inheritance have six weeks to do so. Nicole Mutschke explains: “The period begins as soon as the individual learns of the inheritance and the reason they became an heir. In the case of a will, it generally doesn’t start before the probate court’s announcement.”
Also interesting: Inheriting property: Delayed move-in jeopardizes tax benefits
How can an inheritance be declined?
To decline an inheritance, a letter or phone call is not sufficient. Instead, a declaration must be recorded at the competent probate court. Alternatively, a notary can certify this declaration and forward it to the probate court within the specified period.
But beware! Once an inheritance is accepted, it cannot be declined again.
5 Quirky Facts Realtors Should Share Before a Home Purchase
Gifting Property to Children and Saving on Taxes
How does an estate insolvency work?
An estate insolvency procedure is initiated when an heir cannot pay off the inherited debts. For example, a family is already paying off a mortgage for their own home and has a lease for the family car. They inherit a house from a deceased family member, which they don’t want to live in but would need to renovate before renting out. The costs are too high for the family, so they opt for an estate insolvency procedure.
“Typically, the procedure is used when declining the inheritance is no longer possible or desired, such as when the inheritance has already been accepted or the period for declining has expired,” says the lawyer. Nevertheless, survivors should quickly decide whether they can take on the property with its debts or apply for estate insolvency. According to Mutschke, an heir should apply for the procedure immediately if it’s clear that the inherited debts cannot be covered.
“They are allowed the necessary time for examination and preparation. However, delaying the application makes the heir liable to the estate creditors for any resulting damage.”
When is it sensible to decline the inheritance?
If there is no interest in inheriting assets, the inheritance can, of course, be declined. Even if it’s clear that a property with debts is being inherited, it is financially advisable to decline the inheritance. However, if declining is no longer possible or the insolvency becomes apparent later, estate insolvency is beneficial.
By the way: Legally, those who decline the inheritance are treated as if they were not alive at the time of the inheritance. The estate then goes to those who would have inherited without that person. This means if Person A declines the inheritance, their children could be considered the next heirs. They would also need to decline the inheritance within a specified period.