What is donation according to the Italian Civil Code?
According to the Italian Civil Code (Article No. 769 of the Italian Civil Code), a donation is a contract by which, out of a spirit of liberality, one party (the donor) enriches the other (the donee) by disposing in his/her favor of one of his/her rights or by assuming an obligation towards him/her.
The object of a donation may therefore be real estate (e.g., a house).
What is the tax status? What expenses must be incurred?
The transfer by way of donation is particularly favorable from the tax point of view if it is made in a direct line. The tax rate for donations between relatives in a direct line – for example, between parents and children – is only 4 % on the value that exceeds 1 million euros.
As with any contract regulating the transfer of ownership of the real estate, the donation incurs mortgage tax costs of 2 % of the cadastral value of the property and cadastral tax costs of 1 %. If the donee receives the property as a primary residence, the two taxes are set at 200 euros.
There is also a stamp duty of 230 euros and a registration tax of 200 euros.
The last cost item is the notary fee. The notary fee depends on factors such as the category and cadastral income of the property and is usually based on the stated value of the property.
What are the problems that can arise when acquiring real estate by donation?
What rights do the donor’s heirs have?
Acquisition via donation may cause problems for the donee if he or she decides to sell the property.
This is because the donated property may be the subject of claims by some of the heirs of the donor, namely, those who have an inalienable right to receive a share of the donor’s assets after his/her death (known as reserved share).
These persons are called “forced heirs” and may be, with respect to the donor: the spouse, the children, the descendants in the ascending line or the descendants of the children. Indeed, if the donation violates the reserved share due to a forced heir, because it exceeds the share that the deceased could dispose of, the forced heir may act against the donee for the restitution of this share. If the donee, for his/her part, has alienated to a third party, the forced heir may also proceed against the latter, if the assets of the donee are insufficient for the restitution, although he/she is not related to the donor and his/her heirs at all.
In essence, since the real estate originates from a donation, it can also be claimed back from the third party, as stipulated in Article No. 563 of the Italian Civil Code. Thus, the third-party acquirer, even if completely unrelated to the matter and unaware of the vicissitudes of the donor, could find himself/herself obliged to return the property, and could only free himself/herself from the obligation to return the acquired assets by paying the equivalent value in money.
When can a donation be revoked?
A donation may be revoked due to so-called ingratitude (a rather rare hypothesis, admissible only in case of serious misconduct of the donee towards the donor) or due to the sudden appearance of the donor’s children. However, this hypothesis is more concrete, since by sudden appearance is meant not only the birth of other children of the donor, but also the presence of children conceived before the donation, of whom the donor had no knowledge, and who were later recognized.
Under these dutiful premises, a real estate object of a donation (e.g., a house) may well be offered as collateral for the taking out of a mortgage loan, but often, banking institutions do not consider themselves sufficiently protected for the reasons mentioned above, and therefore consider it their duty to make a careful check before signing the deed of sale.
In conclusion: Is the donation of real estate advisable?
It is only recommended if undertaken after careful examination of the specific case, since it exposes the beneficiary to the risk of possible litigation, if, for example, there is an intention to dispose of the donated property. Certain insurance products can be used to limit this risk.
What is the function of donation insurance policies?
Due to the risks involved in such a transaction, some insurance companies have launched certain products (donation policies) aimed at mitigating the position of the donee in relation to the property received as a donation, in the event that economic damage is caused by the actions of third parties (e.g., forced heirs).
These policies were created for the very purpose of limiting the risks arising from a real estate donation, or the purchase of a property from a donation. In particular, in the event that the property becomes the subject of a reduction action (i.e., the right to claim the inheritance) by the forced heirs, the donee or the new purchaser can obtain, against the insurance taken out, compensation equal to the economic value of the house, the amount of money due to the legitimate heirs of the property, that is the expenses incurred or the loss of earnings.
These insurance products provide protection of an indemnity nature but do not completely reduce the risk of spoliation of the property provided for in the aforementioned Article No. 563 of the Italian Civil Code, since, as already mentioned, the third party can only avoid it by paying the value to the forced heir.
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