What happens to the money in an inheritance after the death of a family member? The way an inheritance is distributed depends on whether there is a will or not.
The will is the legal way to distribute the inheritance according to your priorities, although it also has its limits. Specifically, it must adhere to what is outlined in Chapter II of the Civil Code regarding how to divide assets. In an inheritance without a will, the state will take care of the allocation and determine how the money and other assets are distributed. Let’s explore all possible scenarios, but if you need professional help, both in planning your inheritance and optimizing it if you have received one, you can use our service to find a financial advisor (the search is 100% free).
Inheritance Distribution with a Will
Inheritances are divided into three parts or thirds. These are the legitimate third, the improvement third, and the free disposition third. The Civil Code designates who each of these parts can be left to. The will helps distribute them accordingly.
The Legitimate Third
One third of the inheritance will be divided among the legitimate heirs, who are the deceased’s spouse and children or their descendants if they have also passed away.
This third must be distributed equally among the legitimate heirs. With a will, one can specify who gets what when, for example, there are works of art, cash, and assets of different values. In other words, it allows for an ad hoc division of the inheritance to avoid disputes among the heirs.
A parent can disinherit a child and deprive them of their share of the legitimate portion. However, the child can still claim the legitimate inheritance if they believe there are no legal reasons to be disinherited.
The Improvement Third
This third of the inheritance serves to improve the legitimate portion, as long as it is not an inheritance with children and a surviving spouse. In this case, this third will go to the spouse, as we will see later.
The improvement third of the inheritance is used, as the name suggests, to enhance what one of the legitimate heirs will receive. In other words, it can be used to give more to one child than another in a legal manner.
The Free Disposition Third
Inheritance laws allow up to one third of the inheritance to be allocated to anyone, whether they are a family member or not, whether they are a legitimate heir or not. However, doing so will incur higher inheritance taxes than if it were given to a family member.
Inheritance Distribution without a Will
When there is no will, the state will distribute the inheritance according to the aforementioned guidelines, but without the free disposition third. In this case, the hereditary laws and common law regarding who can inherit and in what order will be directly applied. The order is as follows:
- First group: Children and grandchildren if the parents have passed away.
- Second group: Parents and grandparents, with the latter only inheriting if the parents have passed away.
- Third group: Spouse. They will only inherit the property if there are no heirs from the first and second groups, although they will have the right to usufruct of the inheritance. This means they can use a portion of the assets (we will explain this specific case and the percentage of the legitimate portion they are entitled to later).
- Fourth group: Siblings and nieces/nephews of the deceased. In this case, siblings are the direct heirs, and nieces/nephews inherit when the siblings have also passed away.
- Finally, and only if there are no other heirs, the next in line to inherit would be first cousins and, failing that, the rest of the fourth-degree collateral relatives. This includes cousins, second cousins, and second cousins once removed.
If there are no relatives and no will, the state becomes the heir.
Inheritance When One of the Parents Dies
How is an inheritance divided between the spouse and children? If there is a will, the legitimate inheritance of the children will be two-thirds in ownership. However, part of these assets will be for the spouse’s usufruct of the children’s inheritance.
To put it simply, the assets belong to the children, but the spouse will be the one to use and enjoy them until their own death. This is common when it comes to the family home. Thus, the bare ownership of the property belongs to the children, while the usufruct goes to the spouse.
The percentage of inheritance for the spouse and children when there is a will is 66.6% of the inheritance for the descendants in ownership, but with 33.3% usufruct for the widow or widower. In any case, this usufruct is what in law is known as commutable. In other words, it can be exchanged for ownership of some assets.
Additionally, there will also be the free disposition third, which can go to anyone.
The distribution of inheritance between the spouse and children without a will is similar, with the exception that the free disposition portion is eliminated and passed on to the legitimate heirs in the order mentioned earlier. This is how assets are distributed in an inheritance without a will between the spouse and children. This is why, if you are married and want to secure the future of your partner, it is important to write a will and think about inheritance planning. A financial advisor can assist you.
Inheritance in a Childless Marriage
What happens when there are no children? Logically, one would assume that all the assets would go to the spouse. However, inheritance laws do not follow the same logic.
In these cases, the inheritance order we previously mentioned is applied. Since there are no children, the parents become the legitimate heirs and have the right to the inheritance. The law protects the spouse by granting them half of the inheritance as usufruct, but not ownership.
In other words, half of what the deceased leaves behind goes to the spouse, but only for their use while they are alive, not as ownership.
The situation changes when there are no descendants or ascendants. In that case, the spouse becomes the sole heir. What happens next is related to the inheritance from uncles/aunts to nieces/nephews and what many legal experts consider a small injustice.
In the case of a childless marriage with no parents or grandparents present but with siblings and nieces/nephews, the assets would go to the surviving spouse and then to their living relatives (siblings and nieces/nephews). What about the nieces/nephews from the other side? They would not inherit unless there is a will that includes them.
Inheritance Between Siblings
We have already seen how inheritance is divided when one of the parents passes away and how the children will normally inherit two-thirds of the inheritance in the worst-case scenario. When there is a thorough will, there are usually no issues in dividing the assets.
Problems arise when there is no will. According to the law, the distribution of the legitimate third should be equitable among the siblings. In other words, everyone should receive the same amount of money. This is precisely what causes problems in distributing the inheritance without agreement among the heirs. It may be that everyone wants the same assets or that they disagree on what to do with them afterward.
The most common problem when distributing inheritance without agreement is when one of the heirs neither accepts nor renounces their share. In other words, they do nothing and prevent the rest from proceeding with the estate settlement. In these cases, Article 1005 of the Civil Code allows the other siblings to go to a notary, who will then inform the non-compliant sibling that they have 30 days to either accept the entire inheritance, including debts, or accept it with the benefit of inventory (only accepting what remains after paying debts) or renounce it. If they fail to act, it will be understood as acceptance.
The second issue has to do with the partition of the inheritance. What happens when one of the heirs refuses the proposed distribution, and the will does not clearly indicate what to do in such a case? In this situation, the inheritance can be divided even without all heirs present, as long as the present heirs account for more than 50%. Again, the solution is to go to a notary, who will appoint someone to handle the task. In this case, the partition will be carried out by a partition accountant, as opposed to voluntary partition or the final option, judicial partition.
Inheritance from Grandparents to Grandchildren
Finally, let’s review the inheritance from grandparents to grandchildren. If a grandparent wants to leave any assets to their grandchildren, they can do so in the inheritance through the free disposition third. Only if the parent has passed away will the grandchildren become legitimate heirs. Otherwise, the parent would need to renounce the inheritance, making the grandchildren the inheritors.
Remember, when it comes to inheritance, it’s always wise to seek professional advice and plan your estate carefully.
