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Tag: Estate planning

Legitimate and Necessary Succession

Inheritance by cause of death is a complex legal mechanism that activates upon a person’s demise, allowing one or more individuals, known as beneficiaries, to step into the patrimonial rights of the deceased. This process can occur through inheritance, involving the entirety of transmissible goods, rights, and obligations, or through a bequest, which is limited to the transmission of specified individual rights.

Inheritance is characterized by its universality, including all the active and passive rights belonging to the deceased at the time of death. Unlike bequests that transfer specific rights, inheritance must be accepted or rejected in its entirety; partial acceptance or renunciation is not permitted.

Succession can be classified as legitimate, when the beneficiaries are designated by law, or testamentary, when appointed through a will. According to Article 457 of the Italian Civil Code, inheritance is transmitted by law or by will, with legitimate succession prevailing in the absence, total or partial, of testamentary succession. Our legal system excludes the possibility of “succession pacts.” In the absence of a will, the law determines who the heirs are based on their relationship to the deceased, extending the right of succession up to the sixth degree of kinship. If a potential heir does not accept the inheritance, the right passes to the next in line of kinship, designated by the will or by law.

Article 457, paragraph 3, of the Civil Code also protects the rights of so-called forced heirs, i.e., those relatives who, by law, cannot be completely excluded from the inheritance, even in the presence of contrary testamentary provisions. These individuals, if they find themselves omitted or harmed in their legitimate shares by the will, can undertake legal actions for the reduction or restitution of goods, in order to restore the rights reserved for them by law.

The necessary succession is not considered a separate category, but rather a strengthened form of legitimate succession. It is based on a balance between the freedom to dispose of one’s assets by will and the protection of the interests of the deceased’s family, aiming to safeguard the economic foundations of those who had a direct link with the decedent.

Informal Donations between Parents and Children without Taxation

Recently, the Italian Supreme Court clarified an issue concerning the taxation of donations between parents and children, particularly those made informally or through indirect payments, such as purchasing a house. The ruling no. 7442 on March 20, 2024, definitively established that such donations are not subject to donation tax unless they are formally registered.

The decision criticized Circular 30/2015 of the Italian Revenue Agency, describing it as ‘unshareable’, ‘imprecise’, and ‘incomplete’, because it imposed taxation on all gifts between living persons not accompanied by a registered written deed. However, the Court emphasized that only donations resulting from registered acts or those voluntarily declared by the taxpayer are taxable.

For indirect donations, such as those made through purchase deeds where the parent pays the price on behalf of the child, the Court reiterated that there is no obligation to register the deed as a donation unless specific conditions exist. In particular, the tax applies only if the donation is valued over one million euros and if it is revealed by the taxpayer during a fiscal inspection.

The decision establishes a clear distinction: not all indirect donations emerging from registerable deeds are automatically subject to taxation. The law allows taxpayers the option to voluntarily register such acts as donations, and the tax administration can impose taxes only if the value exceeds one million euros and the donation is declared in audit proceedings.

The Supreme Court’s ruling brings significant clarification for many taxpayers making transfers of assets informally or indirectly. This represents a tax relief, allowing parents to support their children without the fear of heavy tax burdens, unless specific criteria requiring the registration of the donation are met. This interpretation offers greater flexibility and fewer bureaucratic complications for substantial donations or in formal contexts.

Modes of Acceptance of Inheritance: Simple, with Benefit of Inventory, and Options for Renunciation

Inheritance is not only a transmission of assets but also of debts, thus requiring careful consideration before acceptance. This decision rests solely with the designated individual, who, once the inheritance is accepted, permanently assumes the status of heir, as expressed by the principle “once an heir, always an heir”. Acceptance can be “simple” or “with the benefit of inventory”. The former implies a merger of the estates of the deceased and the heir, with the heir’s estate serving as a guarantee for the creditors of the deceased. The latter option keeps the estates separate, with the inherited estate serving as a guarantee.

The right to accept an inheritance expires after ten years, but this period is not final, allowing the designated individual to become an heir even after this period, unless prescription objections are raised. Acceptance with the benefit of inventory requires a formal declaration in front of a notary or the clerk of the court, accompanied by an inventory of assets. Conversely, simple acceptance can be declared explicitly or deduced tacitly from certain behaviors, such as the sale or donation of inherited assets.

Tacit acceptance can also be inferred from actions that indicate active management of assets, inexplicable otherwise except by the will to accept the inheritance, for example, the destruction of the deceased’s property. However, essential conservative actions are not considered tacit acceptances. An inheritance can be formally rejected through a notarial deed, and such renunciation is final and retroactive, freeing the renunciant from any inherited debts.

Legal entities and individuals not fully capable must accept the inheritance with the benefit of inventory and are bound to this mode for a year after reaching full capacity or the end of a legal incapacity, unless they fulfill the required procedures. Failure to draft the inventory within the prescribed terms results in the loss of the right to accept for private entities.

Moreover, once the inheritance is accepted, it is no longer possible for the designate to renounce; the acceptance is irrevocable. Renunciation, on the other hand, is considered as if the renunciant had never been designated, with effects dating back to the opening of the succession. The renunciant’s creditors can contest the renunciation if they suffer harm from such action and may be authorized by the judge to claim the inherited assets in the name of the renunciant.

In summary, the complexity of accepting and renouncing an inheritance reflects the importance of carefully considering the legal and financial implications of such decisions.