When a person dies in Bulgaria and provided that Bulgarian inheritance law applies, the first question that arises is who will inherit the assets and liabilities of the deceased, which constitute the estate (inheritance). This article discusses the individual inheritable assets and the necessary steps in more detail.

I. General

Under current law, the entire estate of the deceased is inherited. This includes movable property, real estate and rights thereto, as well as other property rights, claims and liabilities at the time of inheritance, unless otherwise provided by law. It is generally accepted that property rights and obligations are inheritable, while personal rights and obligations are not. Of course, there are exceptions to this rule – for example, copyrights, which are personal but inheritable.

II. Bank accounts

A common situation concerns the inheritance of account balances. However, it is important to note that the account itself does not form part of the estate, as it was opened in the name of the deceased. The heir must prove their right to inherit to the bank and may then have the balance transferred to their own account. After the transfer, it is advisable to close the deceased's account. If the deceased's account is left open, additional administrative fees may be charged by the banks, which would be charged to the estate's liabilities. It should be noted that in such cases, the bank pays the heir the amount to which he or she is entitled as part of the inheritance and not the entire account balance.

III. Real estate

These assets are also inheritable. To be considered the owner of these assets, no entry in the registers is required in Bulgaria. Your rights arise from the legal circumstances and the supporting documents, i.e. usually the death certificate, the certificate of inheritance and proof of ownership of the property. In some cases, additional documents may be required. For example, if the heir is not a Bulgarian citizen, he or she must be registered in the BULSTAT register. The reason for this is the acquisition of a property on the territory of the Republic of Bulgaria, which establishes the legal obligation to register in this register within a period of 7 days from the occurrence of the circumstances justifying this.
It is important to note that the heir in respect of such an asset is obliged to submit a declaration of real estate transfer tax to the municipality having jurisdiction over the property within a period of 6 months from the date of inheritance.

IV. Movable property

Very often the estate includes motor vehicles, which are considered movable property. However, different rules apply to this type of asset: The vehicle documents must now be issued in the name of the heir. The vehicle may only be used freely once it has been registered in accordance with this regulation. Naturally, the taxes due for the previous year must be paid.

V. Special assumptions

A question that arises frequently these days is related to digital inheritance. Unfortunately, this issue has not yet been regulated by law, and legislation still needs to catch up in this area. The real problem with inheriting digital assets is mainly that the heirs are usually unaware of their existence.

A key feature of digital assets is that they are electronic, digital entries that cannot exist as objects in real life. This feature raises questions as to whether they can be included in the estate, how they should be managed and whether they can be designated as the subject of a partition procedure.

The best example in this area is cryptocurrencies.Since cryptocurrencies are not physically separated, the question arises regarding their storage or transfer to the assets of the heirs. They are materialized in the blockchain system, which—unlike traditional banks—is not centralized but stored on all computers that it connects. Access to the system is granted via the so-called private keys, which are stored in blockchain wallets. The cryptocurrency itself, for example Bitcoin, is not inheritable, which does not apply to access to the private keys. However, if the heirs do not possess the so-called keys, the digital assets may remain forever under lock and key in the blockchain system.

Another practical example is the widespread use of the leading online payment system PayPal. PayPal itself has defined standard conditions that apply in the event of the death of the account holder. The main problem that can arise in such cases lies in the general terms and conditions, which require notification of the account holder's death by the executor of the will and proof of the executor's appointment. This regulation creates further issues, as testators rarely draw up a will during their lifetime and even more rarely appoint an executor. And even if a will exists, digital assets are often completely disregarded. If the heir cannot present a will, they are required by law to submit proof that legitimizes them as heir, such as a certificate of inheritance. If PayPal gives a positive response, the balance of the deceased's virtual account is transferred to an account specified by the heir. The system provides no other possibility for the payout of the funds in the virtual PayPal account, and therefore, the bank accounts linked to the PayPal account should not be closed before the process with PayPal is completed.

Another specific example of digital inheritance is domain names. In theory, the right to a domain name can be inherited, as it is a real right that does not fall under personal rights. Consequently, it is fundamentally inheritable. Regarding domains with the ".bg" extension, a register is maintained in Bulgaria under Register.BG, which defines the general registration conditions. However, there are no specific rules concerning the death of the applicant, change of domain owner, domain management, or the consequences if only one heir assumes management. Problems can arise in the inheritance of domain rights if the heirs cannot agree on how to proceed in the future or if one of them opposes continuing the domain.

VI. Shares in Companies

If the deceased was a sole trader, upon the trader's death, the estate — which includes both their private assets and the assets of the sole trader—is opened. This is because the activity of the sole proprietorship is linked to the natural person of the trader. The tax debts of the sole trader also flow into the estate. This applies regardless of whether one of the heirs continues the business activity or whether the business is to be closed due to the trader’s death.

With regard to general partnerships and limited partnerships, which are considered so-called partnerships, the general legal principle applies that the company is, as a rule, to be dissolved upon the death of a partner unless otherwise agreed. This means that the law also allows for another option to be regulated in the partnership agreement—namely, that the company is not to be dissolved upon the death of a partner. In these companies, the heirs may be held liable for the company’s obligations if the company itself does not possess any assets. If, on the other hand, the company is to be dissolved upon the death of a partner, the heirs acquire a claim to a liquidation share to which they are entitled as heirs. If the heirs do not wish to enter the company in place of the deceased, they are entitled to the value of the deceased’s share and the corresponding profits for the period until dissolution.

In the case of joint-stock companies, which are typical capital companies, succession occurs through inheritance of the shares. In capital companies, the identity of the shareholder is irrelevant, and the inheritance of the shareholding is not questioned. The debts of the capital company are not debts of the individuals involved in it, and for this reason, the company’s liabilities in relation to taxes, charges, and other state and municipal obligations, as well as liabilities to suppliers, are not inherited by the heirs of the deceased shareholder. If a shareholding exists and unless the statutes of the joint-stock company provide otherwise, the heir enters as a shareholder upon acceptance of the inheritance. The acceptance of the inheritance becomes legally effective only upon entry in the share register. If the shares are inherited based on a will, the heir must identify themselves to the joint-stock company by presenting the will, and the entry in the share register then takes place based on the will. However, in order to be inheritable, the shares must meet certain conditions. According to the Bulgarian Commercial Act, the joint-stock company may also issue dematerialized shares. The difference is that the heirs do not legally inherit the rights to dematerialized shares upon the opening of the estate or the acceptance of the inheritance, but only upon their entry as shareholders in the central depository.

No less important is the limited liability company. Here, the transfer of shares to the heirs depends on the provisions of the company’s articles of incorporation. In a limited liability company, the following possibilities exist:

• If inheritance of shares is excluded by the articles of incorporation, the heirs cannot participate in the company. However, they are entitled to the equivalent value of the shares held by their testator.
• If the articles of incorporation allow for inheritance of shares, the heirs automatically enter as shareholders.

It should be noted here that the heirs do not acquire a specific number of shares. They receive an ideal portion of each inherited share in the company, corresponding to their inheritance rights. For example, if the deceased shareholder held 10 shares and left behind two adult children, each of them acquires an ideal share of ½ in each of those 10 shares, not 5 full shares each.

Recently, it has also become possible in Bulgaria to establish a company with variable capital. This is a capital company in which there is no obligation to declare the capital amount. The law explicitly allows for the inheritance, transfer, and pledging of shares in such a company. Unless otherwise specified in the articles of association, the heirs may enter the company upon the death of a shareholder at their own discretion. Entry must be declared within a period of three months from the determination of the estate. If the heirs do not wish to enter the company, the company must pay them the market value of the share as of the date of death of the shareholder. The inheritance, transfer, and pledging of shares become legally effective with respect to the company only upon entry into the shareholders’ list.