Death is usually associated with grief. Especially when it comes to your parents, grandparents or other close relatives.
Death is usually associated with grief. Especially when it comes to your parents, grandparents or other close relatives.
Emotions are all the more intense if you inherit the property in which you grew up. It naturally is linked to so many memories of your parents and your childhood.
Inheriting this property may actually be one of the most difficult times in your life. You are faced with the difficult task of participating in inheritance proceedings, agreeing with other heirs, and eventually selling the property.
Inheritance proceedings can be all the more complicated if they are accompanied by disputes over inheritance and family wrongs.
Let me get rid of the emotional side of inheritance and let’s look at how inheritance proceedings and the possible subsequent sale of real estate are purely legal.
In inheritance proceedings, the deceased is referred to as the testator.
What is an inheritance contract?
It is a special type of contract in which the testator and the heir agree on what the heir will inherit from the testator.
Inheritance may also come in the form of a will, which is a unilateral declaration by the testator of whom he has chosen as heir.
If the testator has written neither a contract of inheritance nor a will, the person designated by law becomes the heir. Typically, the closest relatives (husband, children, parents) take precedence. If the testator does not have any such relative, a “co-habitant” may have claim to inherit a property. A “co-habitant” is someone who has lived in the testator’s property for at least 1 year, looking after the property or treating it as their own during that time. They might also need to be dependent on living in that property (that is, they have no where else to live), for their claim to be upheld. Other more distant relatives may also inherit.
What happens during inheritance proceedings
Inheritance proceedings are initiated upon the death of the testator. A notary, who is called a court commissioner in this situation, entrusts a court to conduct inheritance proceedings.
Although the right of inheritance arises from the death of the testator, it is as yet unclear which specific heir will inherit which specific thing – this will be decided later in the inheritance proceedings. This is because, at the time of the testator’s death, it is not yet clear what property the testator has left.
As part of inheritance proceedings, it is necessary to find out whether a contract of inheritance has been concluded or a will is drawn up, etc. In inheritance proceedings, heirs can also agree on who will acquire what part of the property – cases where the testator had debts.
As part of inheritance proceedings, property (real estate) belonging to the inheritance is valued. The notary will ask you to submit an estimated value of the property for inheritance proceedings. In this case, you can contact our real estate agency.
You can get an estimate from us for free if you later sell the property with us.
Having considered everything necessary, the notary issues a decision. An appeal may be lodged against this decision. If no party exercises the right to appeal within the prescribed period, the decision becomes final and the heirs become owners of the inheritance as specified in the decision.
The right to appeal against the decision may be waived by the participants in the inheritance proceedings directly at the hearing. If there are no irregularities regarding the settlement of the inheritance, this is the most likely event. If all parties to the proceedings do so, the period for appeal closes immediately, and the inheritance decision takes effect from that moment. In this case it is not necessary to wait for the appeal period (typically 15 days) to expire.
It is important to realize that only once the notary’s decision has been declared final and the inheritance proceedings have terminated, that the heirs can then act as owners of the inherited property towards third parties.
If a property is acquired by inheritance, the notary will also ensure that the heir is registered as the owner in the state land registry (katastra). In this way, it is important to note that the heirs become the owners of the property when the inheritance decision is final, and not when the state land registry has changed.
The authorized heir can thus validly conclude a purchase contract for the transfer of real estate before they have been registered as owners in the state land registry. From a practical point of view, however, it is advisable to wait until the heir is listed in the land registry as the owner, before submitting a deposit for buying that property.
How to sell a property following inheritance
If an heir plans to sell an inherited property, a few more steps need to be taken.
Once a prospective buyer has been found, it is necessary to write a purchase contract. The seller who will inherit the relevant property according to the decision on inheritance will be listed on the purchase contract as the seller.
As mentioned earlier, the purchase contract can be signed only at the moment the inheritance decision becomes final. If the parties want to commit to signing the purchase agreement in advance, it is recommended to first sign a future purchase agreement contract, which stipulates the obligation that the property will be transferred to the applicant when the presumed heir becomes the rightful owner of the property.
In inheritance, it is very common for several heirs to co-own a property. For example, each of the three children will acquire 1/3 of a property from the inheritance. In such a case, the purchase contract must be signed by all co-owners (if the property is to be sold as a whole), and it is therefore necessary for the heirs (co-owners) to agree on all practical issues (purchase price, date of handing over the property to the buyer, etc.).
On the other hand, property acquired from inheritance is not part of the ‘joint property of the spouses’, so the heir does not need the consent of the spouse to sell the property.
If an agreement on co-ownership (for example, among the brothers) is not possible, the cancellation and settlement of the co-ownership can be demanded in court through legal means.
It is recommended to write a purchase contract for real estate with the help of an expert, such as a lawyer or notary, who specialize in this field. Alternatively, use a real estate agency to provide a comprehensive range of services.
Similarly, it is recommended to contact a lawyer or notary to request the safekeeping of the funds used to purchase a property. Legal custody protects both the seller and the buyer by placing the purchase funds in a separate holding account immediately after signing the contract. The funds are kept their until ownership is changed in the land registry to the buyer. The funds are only released once the buyer becomes the official owner as listed in the land registry.
After the seller and the buyer agree on the content of the purchase contract, such as who will be custodian and other related issues, it is then possible to proceed to the signing.
The signatures on the purchase contract of all contracted parties must be officially verified for the land registry. After signing the purchase contract and paying the purchase price to the holding account for safekeeping, the purchase contract is submitted to the office of the state land registry.
About a month later, the state land registry will transfer ownership to the buyer, meaning that the parties can physically hand over the property and at this moment transfer the funds from custody in the holding account to the seller (unless the parties agree otherwise).
What are the tax obligations from inheriting real estate
Finally, some tax aspects need to be highlighted in connection with the sale of an inherited property.
In general, income from inheritance is exempt from income tax (following the abolision of the inheritance).
If the value of the inherited property exceeds 5 million Czech krowns, it is necessary to notify the relevant tax office. As part of inheritance proceedings, property (real estate) that is part of the inheritance must be valued.
If the property is subsequently sold at a price exceeding the valuation in question, the difference is subject to income tax (15% for natural persons), unless one of the statutory exemptions from income tax applies when the property is sold.
Typically, tax must be paid on any property that is sold within 5 years of its aquisition. However, in the case of inheritance, an exemption is possible, as the period of when the testator owned the property is also included as part of this 5 years. However, this is usually only the case if the property is inherited by a direct relative, such as a husband or wife.
Detailed information on taxes on the sale of inheritance can be found in the article Income tax on the sale of real estate from inheritance.
In general, it is recommended to always discuss tax matters with an expert when transferring real estate from inheritance.
Mgr. Jan Zajíček, lawyer cooperating with RE/MAX Alfa
We can take care of all matters related to the sale of a property. Start by obtaining an estimate of any property included in an inheritance procedure, which a notary will require from you. You can have it prepared for free if you later sell the property through our real estate agency.
We will prepare an evaluation for inheritance proceedings
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