I have been told that if we formalize a mortgage on the property that we own, we can reduce the cost of inheritance tax on my heirs. Is it legal?


On one hand, it is true that the heirs may deduct the outstanding capital at the date of death, which is a great advantage. But in turn, you have to have in mind  that in the case of the death of the holder of a mortgage, ownership of the property passes to the heirs with corresponding debt (in this case the mortgage). And, according to the law, the debts of a person who dies does not extinguish and creditors can go against the heirs if they have accepted the inheritance on a “simply manner”. So in these cases, we must consider whether it is worth giving up the inheritance, to accept in a way that is called “beneficio de inventario” or renegotiate terms with the bank.
Note that if the amount obtained with your mortgage is intended for financial investments, if they are not successful, you or your heirs could find yourselves in a difficult situation by not being able to meet the conditions of the loan.

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