A gift can play a role in inheritance law in Austria in various constellations. On the one hand, gifts made during the testator’s lifetime can still have subsequent effects on the inheritance, on the other hand, gifts made on death must be taken into account.
The following questions typically arise:
- How are gifts and the right to a compulsory portion related?
- Can I reduce or avoid the compulsory portion by making gifts?
- Is every gift made during my lifetime taken into account in inheritance law?
- To whom can I make a gift on my death?
- Can I give away my entire estate? Can I give away my house?
What is meant by a gift in Austria?
What is meant by a gift in Austria?
Under the civil laws of Austria, a gift is a gratuitous legal transaction, i.e. there is typically no consideration. The object of a gift can be anything from cash, furniture, photo albums to shares in a company. There must always be an intention to make a donation; if someone hands over something on the basis of an obligation, it is not a gift.
- Example
A married couple divorces and, as part of the division of assets, reaches an agreement according to which the husband undertakes to “gift” a property to the joint children in the event of death. Due to the contractual obligation, there is no intention to make a gift and therefore no gift within the meaning of inheritance law.
In Austria, what is a gift on death?
In Austria, what is a gift on death?
A gift on death (in German: “Schenkung auf den Todesfall”) is understood to be a gift that is only fulfilled upon the death of the gift giver. It is therefore a contract between the testator and the donee in which it is agreed that the donee will receive a certain thing upon the death of the testator.
If a gift is independent of the death of the gift giver, it is not a gift on death, even if an agreed condition only occurs after the death of the gift giver.
- Example
Paul wants to give his granddaughter Marina an alpine lodge. However, as Marina is only 10 years old, she is to receive the lodge on her 25th birthday. Since the gift is not linked to Paul’s death, it is not a donation on death, even if Paul should die before Marina’s 25th birthday.
Gifts on death cannot be revoked. Bequests, on the other hand, can.
If the gift contract provides for a general right of revocation for the donor, the gift is invalid. However, a so-called condition of survival is permissible. This can be used to stipulate that the gift loses its effectiveness if the donee should die before the gift giver. In this case, the object of the gift becomes part of the estate. However, if this is not agreed, the gift can be passed on by the donee. The heirs of the donee are then entitled to the gift.
- Practical tip
Gifts on death must fulfil very specific formal requirements. It is not sufficient if they are agreed orally or informally on a piece of paper.
The giver of the gift is bound by a gift on death during his lifetime; he may not sell or give away the object of the gift to a third party. If he does so, the donee may be entitled to claim damages.
- Practical tip
In order to secure a gift on death, prohibitions on the sale and encumbrance of the donated property can be agreed.
Can the entire estate be given away on death?
Can the entire estate be given away on death?
No.
The scope of the donation on death is limited in two ways:
- Firstly, there is a restriction on future assets, of which only half may be given away. This refers to the assets that are added between the conclusion of the contract (the donation is a contract) and the death of the gift giver. The classification under future assets is thus based on the perspective at the time of the donation.
- Secondly, a quarter of the estate must remain free, i.e. may not be given away. If the value of the gift therefore exceeds ¾ of the estate, the gift contract is ineffective to the extent that ¼ of the assets remain.
- Example
Luise has no descendants and therefore makes a gift to her niece Silvia of all her present and future assets on death. At the time of the gift contract Luise has assets of 600, at the time of her death they are 1000. As Silvia may only receive half of the future assets, she can only receive 800 (= 400/2 + 600). At the same time, however, a quarter must remain free, so she can receive a maximum of 750 according to this rule. So that both barriers are fulfilled, Silvia finally receives 750.
Robert gives his best friend Stefan EUR 10,000 on his death. Robert’s estate totals EUR 70,000. There is enough left over from the estate, the gift does not have to be reduced.
But beware: Gifts on death are also subject to additions and imputations in the law on compulsory portions. Claims to the compulsory portion cannot therefore be circumvented by gifts on death unless there is an exemption, such as a gift for charitable purposes. And since gifts on death are only deemed to be “really made” upon the death of the gift giver, such gifts are always within the two-year period that is decisive for the imputation of gifts to gift recipients who are not entitled to a compulsory portion.
To whom can I make a gift on my death in Austria?
To whom can I make a gift on my death in Austria?
There are no restrictions here. You can make a donation on death to anyone you wish. Only the amount of the donation on death is subject to limits in Austria; you are free to choose the addressee.
How are gifts related to Austrian inheritance law?
How are gifts related to Austrian inheritance law?
Naturally, gifts reduce the assets of the donor. If the assets become less, the estate would also become less and the heirs and beneficiaries of the compulsory portion would receive less.
However, the purpose of the right to a compulsory portion is to give certain relatives a minimum share of the deceased’s assets. For this reason, gifts are to be added and credited in the probate proceedings under certain circumstances (addition and imputation). Otherwise, the right to a compulsory portion could very easily be undermined and circumvented by gifts. This is referred to as the imputation of gifts on the compulsory portion (in German: “Anrechnung auf den Pflichtteil”).
However, even among legal heirs, gifts received may in some cases be imputed on the respective share of the inheritance. This is then referred to as the imputation of gifts on the inheritance share (in German: “Anrechnung auf den Erbteil”).
Not only “ordinary” gifts and gifts on death are taken into account, but also the endowment of a child on its marriage, an advance on the compulsory portion, the settlement for a waiver of inheritance or compulsory portion or the granting of a beneficiary position in a private trust.
Which gifts are taken into account in Austrian compulsory portion law?
Which gifts are taken into account in Austrian compulsory portion law?
Not all gifts ever made by the deceased are taken into account. This would also not be possible in practice.
Therefore, a distinction is made:
- If it is a gift to a beneficiary of the compulsory portion (these are the descendants and spouses or registered partners of the deceased, more on this here) it is always taken into account.
- If, on the other hand, the gift was made to someone else, it is only taken into account if it was made within the last 2 years before the death of the deceased.
It does not depend on the time of the conclusion of the contract, but on the provision of the “property sacrifice”. In the case of a donation on death, for example, the reduction in assets only occurs at the time of death and not at the time of the agreement.
- Practical tip
The 2-year period also applies to gifts to children-in-law. This does not apply, however, if they are only pretended and in reality the own child is to be given a gift.
- Example
Theresa gives her daughter her gold jewellery as a gift. Theresa dies 10 years later. The gift can be taken into account in the probate proceedings because the daughter is entitled to a compulsory portion.
Nicholas gives his entire record collection to his neighbour. If Nicholas dies 1 year later, the gift can be added to the estate; if he dies 3 years later, this is no longer possible.
Selma gives a car to her partner Tarik. This gift is only taken into account in the estate if it was made within 2 years before Selma’s death.
Noah gave a ring to his ex-girlfriend 25 years ago. This gift is disregarded.
How are gifts added under Austrian laws on compulsory portion?
How are gifts added under Austrian laws on compulsory portion?
If gifts meet the time criteria, they can be added to the estate. However, this does not happen automatically, but only if it is requested. Depending on the constellation of cases, different persons are entitled to demand an addition:
- If the recipient of the gift was entitled to a compulsory portion, the beneficiaries of the compulsory portion, heirs, the dormant estate and, under certain circumstances, legatees and gift recipients are entitled to demand the addition.
- If, on the other hand, the gift was made to someone else, only children and spouses can demand addition and imputation. Children, however, only if at least one child was already in the world at the time of the gift. Spouses must already have been married at the time of the gift.
- Example
The mother gives her daughter Franziska a very valuable ring. Both the surviving father and Franziska’s sister can demand an addition.
Hermine gives her mother a securities deposit. At this point, Hermine’s eldest child, Lukas, is already born, but his two younger siblings are not yet. All three children can claim an addition independently of each other.
Benjamin gives his sister a property as a gift. Two months later, he and his wife Mia marry. When Benjamin dies, Mia cannot claim an addition because they were not yet married when the gift was made.
The addition increases the value of the estate and the amount of the compulsory portions increases. It is pretended that the assets given away are still in the estate.
In a second step, the gifts are then credited to the actual donees (imputation). Their compulsory portion is thus reduced by the amount they have already received in advance through the gift.
- Example
When Franco dies, he leaves a fortune of EUR 50,000. In a will he has named his favourite football club as his heir. Four years ago he gave EUR 10,000 to his favourite son David and nothing to his second son Mark. In the probate proceedings, the gift is added and credited. The estate is therefore to be assessed at EUR 60,000. The compulsory portion of both is EUR 15,000 each. David has to take into account the EUR 10,000 he received as a gift and gets EUR 5,000. Mark receives EUR 15,000. The result is as if the gift had not happened and the assets had still remained in the estate.
Viktor leaves his three children Klaus, Olivia and Charlotte and his wife. Klaus received EUR 30,000 five years ago and Olivia received EUR 100,000. Viktor names his girlfriend as his sole heir. The estate amounts to EUR 230,000, after adding the gifts EUR 360,000. The wife has a claim to a compulsory portion of 1/6, i.e. EUR 60,000. The children each have a claim to 1/9, which is EUR 40,000. Klaus and Olivia have to take into account the gifts they received. Klaus receives EUR 10,000 and Olivia receives nothing. Charlotte receives 40,000 EUR.
Are charitable donations also taken into account?
Are charitable donations also taken into account?
If the donation was a gift for charitable purposes, it is irrelevant. This is because certain donations are exempt from additions and imputation. This is the case if the gift did not reduce the original assets, if the gift was made in fulfilment of a moral duty, for reasons of decency or for charitable purposes.
- Example
Smaller gifts are not taken into account if they can easily be covered from regular income, e.g. tips or birthday and Christmas gifts of the usual extent. Donations to humanitarian or public institutions such as schools, universities and aid organisations are also exempt. In addition, donations for charitable purposes are not limited in amount.
- Practical tip
You can donate your entire estate to a university without it being added to and imputed on the compulsory portion. In this way, the assets can be withdrawn from the beneficiaries of the compulsory portion. Only in the case of a donation on death would a quarter of the assets have to remain free and fall into the estate.
I would like to give my child money now and do not want his or her compulsory portion to be reduced later, is that possible?
I would like to give my child money now and do not want his or her compulsory portion to be reduced later, is that possible?
Yes, that is possible. Within the framework of a testamentary disposition or as a written agreement between the deceased and the donee, an imputation can be waived for the donee himself.
But: The compulsory portions of other persons entitled to a compulsory portion must not be reduced by this!
As a gift recipient in Austria, do I have to provide information about the gift?
As a gift recipient in Austria, do I have to provide information about the gift?
Yes, all those who can demand an addition and imputation also have the right to receive information about gifts. Otherwise they would have no chance of obtaining an addition because they know nothing about the gift. The estate, heirs and gift recipients must provide information.
I have received a gift, do I have to give some of it to the beneficiaries of the compulsory portion?
I have received a gift, do I have to give some of it to the beneficiaries of the compulsory portion?
Yes, this can sometimes be the case if the estate is not sufficient to pay each entitled person their compulsory portion. You as the gift recipient must then contribute with your gift so that the compulsory portions can be satisfied. However, you never have to pay more than you received as a gift. And if you were not entitled to a compulsory portion at the time of the gift and the gift was made more than 2 years before the death of the testator, you do not have to hand over anything at all.
- Example
Julian and Anna are married and have a daughter Lina. Anna gave her best friend EUR 30,000 one year before her death. At that time she was married and the daughter Lina was already born. When Anna dies, she names her brother as her heir, the estate amounts to EUR 12,000. The husband Julian is entitled to a compulsory portion of 1/6, which corresponds to EUR 7,000 after adding the gift. Lina is entitled to a compulsory portion of 1/3, which is EUR 14,000. The estate cannot cover the compulsory portions. Therefore, Anna’s best friend is liable for the difference so that the compulsory portions can be satisfied.
In Austria, how is a gift taken into account in the inheritance quotas?
How are gifts taken into account in the inheritance quotas?
In principle, in Austria, a gift is only imputed on the inheritance share (not the compulsory share!) if this has been stipulated in a will or agreed between the donee and the gift giver.
In addition, such imputation takes place if the children of the deceased inherit on the basis of intestate succession and a child requests it. However, if the imputation was waived or if the gift was made without diminution of the ancestral property, no imputation among children is possible. The reason for this is that the legislator assumes that parents want to treat their children equally unless they stipulate otherwise. If a will has been made for this reason, no child can demand imputation (unless it has been stipulated or agreed in the will). The imputation among children, however, only has an effect among them; it has no effect on a spouse, for example.
Spouses or registered partners, on the other hand, must have everything they receive from a marriage or partnership pact or inheritance contract (in German: “Erbvertrag”) imputed to them at the request of the co-heirs. This is to avoid a double benefit for the spouses.
In contrast to the addition and imputation on the compulsory portion, the imputation on the inheritance share does not result in an obligation to surrender, even if there are not enough assets in the estate. Only if the gift cannot even satisfy the compulsory portion can the donee be obliged to surrender the assets.
- Example
Isabella leaves four children, no spouse and an estate of EUR 85,000. She has not made a will. She gave her eldest son Sebastian a flat for EUR 75,000 while he was still alive, and she gave her youngest daughter Marlene EUR 60,000. The twins Leon and Tobias each received EUR 40,000. Without imputation, each child would receive EUR 21,250. If, however, the children demand an imputation, their share is EUR 75,000 each. Sebastian therefore gets nothing, Marlene gets EUR 15,000 and the twins get EUR 35,000 each.
Lisa received a painting from her husband Leopold for EUR 35,000. When Leopold dies, he leaves EUR 55,000. Lisa inherits 1/3, the son inherits 2/3. If Leopold has demanded an imputaton, the estate is to be assessed at EUR 90,000. Lisa is entitled to 1/3, i.e. EUR 30,000. However, since she has to take the painting (EUR 35,000) into account, she gets nothing more. The son inherits EUR 55,000, which is all the estate has. Since the son receives more than his compulsory portion, Lisa does not have to hand over anything.
In Austria, how is it assessed how much a gift is worth?
In Austria, how is it assessed how much a gift is worth?
The thing given as a gift is always added and imputed with the value it had when the gift was “really made”. So here, too, it is a question of the time of the “property sacrifice” and not when the contract was concluded. This value must then be adjusted (usually revalued) to the time of death using the applicable consumer price index.
The risk of deterioration or loss of the gifted object is thus borne by the donee. In return, she also benefits from the increase in value.
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