The Italian Gift Deed (Atto di Donazione): A Brief Guide
What is an Italian Gift Deed (Atto di Donazione)?
In Italy, gifting movable and immovable assets is an act whereby someone (the donor) transfers assets to someone else (the donatee). The gift must be made of the donor’s own free will and the donor must be legally capable of doing so. Minors, wards of court and anyone who has been deemed incapacitated cannot gift assets.
Gifts are made through the instrument of a formal public deed, a Gift Deed (atto di donazione), which must be formalised by a notary in the presence of two witnesses.
If one party does not speak Italian and the notary does not know that party’s language, an interpreter must assist and at least one of the witnesses must be able to understand Italian.
Gifts can be real estate property, personal assets, cash, securities. In line with financial anti-laundering regulations, cash gifts exceeding €2,999 must be made using traceable financial instruments, such as a bank transfer.
Where personal assets are being gifted, each item and its value must be recorded in the Gift Deed or in a separate inventory signed by all parties, the witnesses and the notary. This requirement guarantees that each asset is precisely identified and itemised and that the donor is aware of exactly which personal assets are being transferred.
Can an Italian Gift Deed (Atto di Donazione) be revoked?
A Gift Deed is widely perceived as a less costly method of transferring assets than a Deed of Sale. It is often used to make arrangements for family assets, particularly property.
Many people do not realise, however, that transferring assets through a Gift Deed entails drawbacks.
Unlike a Deed of Sale, a Gift Deed is revocable and can be appealed through the courts. Obviously this can pose problems and in all cases it is a time-consuming process, which can quickly become costly.
There are only two legal reasons a donor can request that an Italian Gift Deed be revoked: the first is aimed at sanctioning, albeit indirectly, the “ungrateful” behaviour of the donatee. Technically, this is referred to as “ingratitude” by the donatee and is governed by art. 801 of the Civil Code.
The second reason concerns children. Art. 803 of the Civil Code states that a Gift Deed made by a donor who did not have, or did not know that they had legitimate children or descendants at the time the Gift Deed was made, can ask the court to revoke the deed on the grounds that the donor would not have transferred assets had they known about the children.
If a judge rules to revoke a Gift Deed, the relevant assets, or the financial equivalent will need to be returned to the donor.
Can an Italian Gift Deed (Atto di Donazione) be challenged by, “Legitimate Heirs”?
Italian law ring-fences inheritance quotas to protect a decedent’s spouse, children and ascendants. These Legitimate Heirs have a legal right to a share of an inheritance.
Italian law views a Gift Deed as an advance on inheritance. Italian Gift Deeds are therefore subject to the same types of appeals that Wills are subject to by Legitimate Heirs.
If one or more Legitimate Heirs consider they have, as a result of a Gift Deed, been wronged or deprived of their share of an inheritance in favour of other persons (whether or not they are other Legitimate Heirs), the case can be taken to court.
Such cases can only be brought to court after the death of the donor. Claims are brought against the donatee.
If the court rules in favour of the Legitimate Heirs, but the donatee has already transferred (given or sold) the assets received in the Gift Deed to third parties, and does not have sufficient personal assets to settle Legitimate Heirs’ share of their inheritance, the subsequent owners of the assets can be taken to court in order to gain restitution of the assets or the equivalent financial value of the assets.
Is there a statute of limitations?
Legal action relating to Gift Deeds is time limited:
Actions related to revocation by the donor on the grounds of “ingratitude” must take place within 1 year from the day the donor becomes aware that revocation is justifiable;
Actions related to revocation for the contingency of children must take place within 5 years from the date the child was born or that the donor became aware of the child’s existence or the date the donor legally recognises the child;
Action of reduction cases proposed by Legitimate Heirs must take place within 10 years from the death of the donor;
Actions related to restitution of assets to Legitimate Heirs must take place within 20 years after the Gift Deed. However, the limitation period can be extended if the Legitimate Heirs obtain an out-of-court injunction to oppose the Gift Deed. The right to oppose the Gift Deed can also be waived.
What are the problems with property resale and mortgages?
As you can see, assets in an Italian Gift Deed are abstractly at risk of revocation for a long time. You can only really rest assured that a Gift Deed is valid after 20 years have elapsed.
Reselling an asset received as a gift, particularly real estate property, is difficult. Especially if the third party buyer has to take out a mortgage to purchase the property, since banks will not give mortgages that are secured on an asset that could be taken away from them tomorrow.
How can I minimise risks if I’m buying an Italian property?
It’s vital you do your due diligence. Is the property you want to buy owned by someone who received it through a Gift Deed?
This should be on your list of encumbrances, adverse entries and other searches before you sign any paperwork. To avoid problems, it is essential that you check the details or have your lawyer look in to it.
Should the donatee / vendor fail to inform the buyer that the property has been transferred by means of a Gift Deed, the buyer is only entitled to back out of completing the Deed of Sale if it can be proved that there is a real and concrete risk that exposes the buyer to reduction, and therefore, potential restitution actions.
Buyers can avoid getting in to trouble, if at the time of purchase:
20 years have elapsed since the Gift Deed without any opposition by Legitimate Heirs;
10 years have elapsed since the opening of the succession procedure without an application for reduction being transcribed against the donatee/vendor.
However, the buyer’s position may also be safe if the donor is already deceased, as only in this case is it possible to obtain a valid waiver of a reduction action by Legitimate Heirs.
Moreover, the law offers protection to property buyers even in the absence of the expiry of the twenty-year period from the transcription of the Gift Deed. If the property transaction is executed ten years after the opening of the succession procedure, the Italian Civil Code stipulates that any legal action brought by Legitimate Heirs shall not affect third parties who have acquired property rights, through payment, on the basis of a document transcribed or written before the transfer of property rights.
Are you thinking about gifting your Italian property through a Gift Deed?
Discuss your personal situation with a lawyer so that you are sufficiently informed about the risks involved and the choice of instruments available. A Gift Deed may not be the best option for you in the long run. It may be better to transfer assets through a Deed of Sale.
Our partners at De Tullio Law Firm are Italian inheritance and real estate law experts present throughout Italy and are specialised in cross-border property transactions and inheritance matters.
Should you need any further clarification concerning Gift Deeds or other property-related topics, we are here to help. Please get in touch.