Forced Heirship under Italian Law

Forced Heirship under Italian Law

Italy is a civil law country and title to property succeeds from one generation to the next according to the provisions of the Civil Code. Property may pass by the laws of “headed” succession (without a will), or by will or other testamentary instrument.

Forced Heirship

Forced heirship is an aspect quite specific to Italian Law, insofar as it poses stringent limitations to the freedom of a person to dispose of its assets post mortem, and to some extent also in his/her lifetime. Below we will consider its main provisions and practical examples.

Under the Italian Civil Code, when a person dies, several persons named by the law—the so called “called to inheritance,” which is the literal translation of “chiamati all’eredità”—are entitled to become heirs and entitled to the estate of the deceased.

In order to become heirs, persons “called to inheritance” (chiamati all’eredità) are required to accept the inheritance,[As explained fully below, the rights of the heirs differ according to whether or not the decedent left a will, in that Italy limits the right of a testator to give his assets to anyone other than his spouse and descendants by his Will.] unless they are declared “unworthy to succeed” [See article 463 of the Italian Civil Code.] by an Italian Court following a claim made by another heir or any interested person.

Under Italian law, the spouse, the children born in and out of marriage and the ascendants of the deceased are defined “forced” heirs (so-called “legittimari”) as they are mandatorily entitled to receive a predetermined share of the deceased’s estate, which is called the reserved portion.[See article 536 of the Italian Civil Code.]

The total amount of the reserved portion, to be shared amongst the forced heirs (legittimari), is calculated in the following manner. The debts of the deceased must be deducted from his or her estate, whilst the properties disposed of by gift by the deceased during the lifetime – without any time limit – must be fictitiously added, according to their value determined by the rules set out under articles 746 to 751 of the Italian Civil Code (the so-called collazione).[See article 737 of the Italian Civil Code.]

Therefore, collazione of immovable property is done either by restoring the property in kind to the estate or, by ascribing the value of the immovable at the time the succession is opened to the donee’s share.

Collazione of movable property is done only by ascribing to the donee’s share the value of the asset received by gift at the time the succession is open: that is, the value of the property at the date of death, not the date of the gift.

However, the donor may expressly exempt the donation from collazione (the so-called dispensa dalla collazione) if the disposition of assets represented by such donation does not exceed the share the deceased could have freely disposed of. The exemption can be either explicit or implicit.

Under the forced heirship regulation, donation includes any contract or act (including the transfer of properties to trustees under the Hague Convention) that a forced heir directly or indirectly benefits from. However, the expenses for maintenance, education and illnesses [See article 742 of the Italian Civil Code.] as well as the donations of small value received by the spouse [See article 738 of the Italian Civil Code.] shall not be counted to such effects.

For example, if the value of the estate of the deceased is one million Euros, debts are 500.000 Euros and the value of the donations made during his lifetime is 300.000 Euros, the total amount of the reserved portion is 800.000 Euros (=1.000.000-500.000+300.000).

Based on this total amount, the share to be transferred to each forced heir is calculated in accordance with the provisions of the Italian Civil Code, as follows:

  1. If the deceased is married and has no children, his or her surviving spouse is entitled to one-half of the deceased’s estate. It means that the testator may freely dispose of the other one-half during his lifetime or on his or her death. In addition to the reserved portion, the spouse is entitled to live in the house where the family resides and to use all the furniture in the home for life.
  2. If the deceased leaves only one child and no surviving spouse, the child is entitled to one-half of the estate. However, when two or more children survive, they are entitled to two-thirds of the estate, which must be divided equally amongst them.
  3. The amounts of the reserved portions described above are reduced in case of surviving spouse and children. In the event the deceased leaves a spouse and one child, they both have right to one third each of the estate. Therefore, the testator may freely dispose of one-third only of the estate during his or her lifetime or on his or her death.
  4. However, if the deceased leaves a spouse and two or more children, by law one-fourth of his or her estate is for the spouse and one-half is to be equally shared amongst the children. In this case, the testator may have validly disposed of one-fourth of his or her estate during his or her lifetime or on his or her death to other beneficiaries.
  5. If the deceased does not leave any descendants, his or her ascendants are mandatorily entitled to: (i) one-fourth of his or her estate, the surviving spouse being entitled to one-half; or (ii) to one-third of the estate of the deceased in case of no surviving spouse.

In case the estate of the deceased includes any specified assets, such as immovable, the value to be considered for the above-mentioned purposes is the value of the asset at the death of the deceased, which may be determined by an expert.

In order to restore the reserved portion, the Court may order that the asset received by the involved heir, the legatee, or the done, be divided between the transferee of the asset and the prejudiced heir.

In case the asset cannot be conveniently divided, it must be assessed if the legatee or donee has an interest in the asset in excess of one-fourth of the disposable portion. In this case, the asset must be left in the inheritance, subject to the right of the legatee or donee to receive the value of the disposable portion.

In case the legatee or donee has an interest in the asset not greater than one-fourth of the disposable portion, he or she may retain the asset but he or she is obliged to a monetary compensation in favour of the forced heir to restore its reserved portion (See article 560 of the Italian Civil Code).

If the legatee or donee is a forced heir he or she may retain the asset, provided that its value does not exceed the total of the disposable portion of his or her reserved portion.

Should the reserved portion be prejudiced by any dispositions of the testator, the forced heir may claim for re-apportionment according to the following mandatory rules. First, against the will’s dispositions under which the testator has appointed an heir or a legatee; and second, against the donations made during the testator’s lifetime, starting from the most recent to the oldest dates.[See article 559 of the Italian Civil Code.]

To restore the reserved portion, the Court may order: (i) the restitution of the object received by the involved heir, the legatee or the donee; or (ii) monetary compensation from the claimant.

In the light of the reserved portion protection described above, forced heirs cannot be disowned by the testator, nor excluded from the inheritance, nor may any donation the testator may have made, legacy or other legal device prejudice their portion.

This principle entails that any forced heir disowned or excluded from the inheritance may challenge in Court the clause of exclusion provided for by a will or any disposition of assets which prejudices his or her reserved portion. https://pavesioassociati.it/

 

forced heirship

Carlo Pavesio

Pavesio & Negri-Clementi
Financial consequences of Death and Incapacity in Spain

Financial consequences of Death and Incapacity in Spain

Certain situations involve personal and financial consequences that one can foresee before they arise. A proactive approach entails foreseeing and regulating the consequences of death; and disability. What should I be aware of in each case? And which tools are available to me?

What are the main tools available to me in Spain to control the effects of my death, or of supervening incapacity?

There are very important personal and financial consequences attached to both death and certain life events or circumstances (like supervening incapacity), especially in the context of a family business, which can be shaped by the arrangements you make of your own free will.

Although most people are aware that they have the chance to control the use and distribution of their assets when they die, by providing a will, there are still not very many who devote the necessary time and resources to making proper plans and arrangements for their succession in all the related areas and possibilities. People often shun the idea of thinking about and controlling such a definite future event as death, and are normally even more reluctant to think about and control potential cases of supervening incapacity.

While it is not easy to embark on a thought process on these issues, if it is confronted as a responsibility, it will be an opportunity to gain a clear idea of your wishes, make sure they are fulfilled, and give peace of mind to the people in your family and business environment. This thought process will, in all likelihood, end with the signature of various legal documents which will be the means to realize your wishes.

Financial consequences of Death

Death generally entails the transfer of a person’s assets, rights and obligations to their heirs. A person’s legacy is guided by their wishes expressed principally in a will, or in the absence of a legal document setting out their wishes, by the provisions in the law.

While there are certain legal limits, such as forced heirship, which depend on the applicable law (and therefore on nationality and/or residence) the maker of a will has a considerable amount of freedom to make their own decisions. It is therefore crucial in succession planning to give thought to what your wishes actually are, and then make arrangements for those wishes, by asking and answering questions of the following type:

  • Are there any circumstances I am particularly worried about concerning my family or financial structure? Such as, for example:
    1. Administration of the assets of minors or incompetents.
    2. Unequal treatment among my descendants.
    3. Special protection for my spouse or long term partner (particularly if they are not the parent of my descendants).
    4. Protection of assets with regard to family members by marriage.
    5. And so on
    6.  
  • Do I want certain assets to be kept in the family after the next generation?
  • How and on what terms would I like to leave my assets?
  • I am not Spanish but do I have considerable assets in Spain?
  • Does the current structure of my assets fit the structure needed to fulfill my last wishes?
  • Are my wishes legally and economically viable?

These are just some of the key general questions that must be thought about to arrange for the will maker’s wishes, which may need to be controlled using the instruments provided in the legal system, such as: special administration of assets for minors, usufructs, fideicommissary or trust-type arrangements, appointing nominees, controlling the ultimate destination for assets, codicils etc., as allowed by the applicable law.

From a strictly formal standpoint, we wish to point out that the wills of Spanish nationals executed abroad are recognized as valid in Spain provided that their form is in accord with Spanish law or with the law of the place where the will was executed.

Further, for foreigners with assets in Spain, it will generally be recommendable for them to execute a codicil in Spain before a notary, which only contains provisions on the arrangements for assets located in Spain, and for that codicil to be registered at the Spanish registry of wills (Registro de Actos de Última Voluntad); in the absence of such a codicil, the arrangements for the assets in Spain will be governed by the provisions in any will executed by the foreigner which is valid according to his national law or the law of the place where it was executed.

Supervening incapacity

Greater life expectancy has increased the occurrence of age-related dementia, which in many cases is degenerative, often leaving sufferers unable to make their own decisions, and the occurrence of strokes, for example, which can result in the same type of impediment, temporarily or for life.

Aware of this fact, Spanish lawmakers drew up, some ten years ago now, Law 41/2003, of November 18, 2003, on the financial protection of people with disabilities, which gave anyone with sufficient capacity to act, the ability, in anticipation of being declared incompetent by the courts, to leave instructions concerning their person or assets in a notarized deed, including the appointment of a guardian or an administrator for their assets and measures for their supervision. This is known as self-guardianship.

Under these types of arrangements, decisions that were previously the domain of judges can now be taken by anyone.

As a result, to carry out proper financial planning, you will need to answer questions such as:

  • What will happen to my assets if I become incapacitated through an accident or illness?
  • Who will manage them?
  • Who will act on behalf of the shares in the family business?
  • How and with what type of control or supervision?
  • Who will take the decisions in relation to my personal care?

Further, aware of the reluctance of family members to have people suffering from those impediments declared incompetent, Spanish law allows a power of attorney granted by a person with full capacity to act to be able to continue in force, if they so wish, in the event of supervening incapacity, and also allows a power of attorney to be granted which will only come into effect if the grantor becomes incapacitated. In which the grantor can also say how their incapacity must be determined (it is usual practice in these cases for the principal to provide that their incapacity will be determined by producing two doctors’ certificates from independent institutions declaring that there is a physical or mental failing that prevents the principal from making their own decisions).

Lastly, Spanish law allows a living will or advance directive to be drawn up so that anyone can provide instructions on their healthcare, to be implemented if they have a terminal illness (within the applicable legal limits, since active euthanasia is not permitted in Spain).

The documents described above (self-guardianship, power of attorney in anticipation of incapacity and a living will or advance directive) are registered at various registries, to make sure they will be applied if the circumstances triggering them occur. http://arantxatobaruela.com