Introduction
Receiving a property through an indirect donation can offer advantages, but careful consideration is essential.
Indirect donation is an act that yields the same effects as direct donation (financial gain for the recipient and depletion for the donor) without the required legal formalities, such as a public deed and the presence of two witnesses. It involves properties purchased by a donor and registered under the name of a receiving family member. While it may seem straightforward, this process can hide various pitfalls, making it crucial to understand what to expect with an indirect property donation.
How does direct donation work?
Direct property donation refers to the transfer of property ownership from a donor to a beneficiary without the use of money as a medium of exchange. In other words, the donor relinquishes ownership rights to the property without any monetary exchange.
Direct donation requires a public deed executed in the presence of two witnesses. Unlike indirect donation, which is formally established through mutual agreement between the parties, direct donation involves the execution of a real estate purchase contract in the presence of a notary, along with all its formalities. Monetary donations during a person’s lifetime follow specific rules.
When does indirect property donation occur?
An indirect property donation occurs when there is no direct sale or donation between the donor and the recipient. Essentially, it takes place when a property is acquired using funds provided by the donor, with the property registered under the name of a third-party recipient.
Here are scenarios where an indirect property donation might be applicable:
- Trust: A legal entity created to manage assets on behalf of a beneficiary. The donor transfers property ownership to the trust, acting as a custodian.
- Usufruct: The right to enjoy a property without formal ownership, granted to a specific person through legal agreements.
- Donation with Reserved Usufruct: A scenario where a person donates a property but reserves the right to use or receive its benefits until a specified time.
- Lease or Lease-Purchase Contracts: Agreements where a property owner allows another person to use or rent the property, with an option to purchase in the future.
- Family Agreements: In family agreements or succession plans, provisions may grant the use of a property to a family member without formal property transfer.
What are the costs associated with an indirect property donation?
Indirect donation offers economic savings, as a single notarial operation achieves two results:
- Donation of a property enriching the recipient.
- Savings on property donation costs.
In the case of indirect donation, taxation includes the standard registration tax of 2% or 9%, depending on whether the house is the first or second property. Indirect donation incurs gift tax only when resulting from acts subject to separate registration, not when directly connected to real estate purchase deeds. Indirect property donation also saves time by eliminating procedures associated with a traditional property purchase.
Who can contest an indirect property donation?
Consider the example of a son wanting to sell the property donated by the father: the new buyer may face a demand for restitution from the donor or their heirs.
Indirect donations can be contested by the donor’s heirs during succession if they are harmed by the process. In such cases, the affected children may seek a reduction to obtain their rightful share, subject to a prior assessment of the actual validity of the claim.
This issue can be addressed by the seller securing a comprehensive insurance policy for the buyer, covering the risk of restitution.
For any further inquiries or clarifications, feel free to ask!
