Qualified acceptance in practice (Part 2)
Key points before and after commencing the qualified acceptance process
In my previous column, I discussed in what circumstances the use of qualified acceptance should be selected. In this column, I would like to talk about the details of how to proceed with the qualified acceptance process.
Contemplating an application to extend the deliberation period
The deliberation period is the period for deciding whether to renounce an inheritance or commence the qualified acceptance process. An heir must decide whether to commence the renunciation process or the qualified acceptance process, or undertake neither of the processes (i.e. unconditional acceptance) “within three months of the time he/she has knowledge that there has been a commencement of inheritance for him/her”. Despite the name of the deliberation period, it is necessary to decide within the extremely short period of 3 months, so it requires considerable courage to decide whether to use the qualified acceptance process, which entails a particularly complex process.
On this point, if a decision cannot be made within 3 months, it is possible to apply for an extension of the deliberation period at the Family Court which has jurisdiction over the decedent’s last residential address. The application to extend the deliberation period is granted comparatively easily, plus there are no particular rules about how long the period can be extended, so there is a certain amount of flexibility. Of course, it is necessary to complete a written application that describes in some detail the reason for applying for the extension, the details that are planned to be investigated during the extended period, and the reasonableness of the period of extension that is requested.
Also, although it is not a strictly judged process, there is a possibility that the extension will not be granted, so the application should be made with time to spare, or it is acceptable to consult with the court if there is no time to spare.
Applying for qualified acceptance
If the investigation of the assets has been completed to a certain extent during the deliberation period and there are at least no obvious liabilities that exceed the assets, but there are circumstances that do not allow unconditional acceptance such as the possibility of hidden guarantee obligations, this leads to an application for qualified acceptance.
The application for qualified acceptance is made to the Family Court which has jurisdiction over the decedent’s last residential address, the same as for an extension of the deliberation period.
An application for qualified acceptance requires submission of not only a Family Court petition, but also inventories of the estate’s assets and liabilities. Of course, it is normal that not all of the assets and liabilities have been identified at the application stage, so it is acceptable to only enter what has been identified as of the time of the application.
When there is only one heir there are no particular problems, but when there are multiple heirs the Family Court will appoint one of the heirs as the administrator of the estate’s assets concurrently with the qualified acceptance process. If the Family Court petition (or statement) identifies a preferred heir to be appointed, that person will generally be appointed as the administrator of the estate’s assets. Therefore, it is necessary for the heirs to thoroughly discuss and decide who will act as the administrator of the estate’s assets before applying for qualified acceptance.
Actions after qualified acceptance application is received
After the Family Court has received the application (formally known as the “declaration”) for qualified acceptance, the heir (if there is only one heir) or the administrator of the estate’s assets (when there are multiple heirs) must promptly commence the liquidation of the estate’s assets.
The first task is to publish a public notice in the Official Gazette within 5 days of the court’s acceptance (10 days for an administrator of the estate’s assets) to the effect that all creditors and donees should submit claims within 2 months. The process itself is completed by simply sending a draft notice to one of the Official Gazette distributors located across the country and requesting its publication, but because it is necessary to have it published immediately after the court’s acceptance, it is better to prepare a draft before the court’s acceptance of the qualified acceptance so that you can submit it promptly. The Official Gazette’s listing fee is based upon the number of lines of text in the notice, so it is necessary to confirm the cost also.
Publishing a public notice in the Official Gazette alone is not enough though; it is also necessary to send a separate notification to all creditors who have been identified at the time of the application’s acceptance that states that qualified acceptance has been undertaken and that creditors and donees must submit their claim within two months. When receiving submitted claims, it is safer to request the submission of documents that evidence the existence and details of the right.
Next is to open a bank account for the collection of the estate’s funds. It is preferable to name the account so that it is objectively clear that the account is for the purpose of qualified acceptance, e.g. “Decedent Taro Higashimachi Qualified Acceptance Heir Takuya Murao” or “Decedent Taro Higashimachi Estate Administrator Takuya Murao”. There are two main reasons for not using an account that already exists. The first is to avoid the risk of it being regarded as an unconditional acceptance. For example, if the estate’s assets are collected into an existing account and an heir accidentally withdraws from the account for their own benefit, there is a risk that it will be deemed as unconditional acceptance because the heir has handled the estate, regardless of the fact that the qualified acceptance process has not been completed. Another reason is the risk of the estate’s assets and the heir’s personal assets becoming mixed. If the estate’s assets and the heir’s personal assets are mixed, this will result in the true value of the decedent’s estate becoming unclear and the possibility that the greatest benefit of qualified acceptance, namely “the upper limit of the estate’s liabilities (repayment of the estate’s obligations to the extent of the estate’s assets)”, will not be accepted.
For these reasons a new bank account should definitely be opened for the sole purpose of use during qualified acceptance, even if it is troublesome.
In the next column, I will explain the liquidation process, which is the heart of the qualified acceptance process.
(Translated from the original Japanese)