Lifetime Gift
Lifetime Gift
A lifetime gift refers to the gratuitous transfer of assets, such as money, real estate, valuables, or rights, from one person to another during their lifetime. The purpose may be to financially support relatives or other individuals before the inheritance occurs, to utilize tax advantages, or to specifically preserve family assets. This form of asset transfer is not only legally but often emotionally significant, as it influences the donor’s scope for action and the donee’s financial security.
A lifetime gift is the gratuitous transfer of assets or rights between living persons, often for early support or security.
Essential Legal Foundations
In Austria, gift tax is no longer applicable. Nevertheless, a report must be submitted to the tax office if certain value thresholds are exceeded.
Exceptions: Certain occasional gifts (e.g., birthday or graduation gifts up to 1,000 Euros per year) and gifts for housing acquisition under clear conditions are exempt from reporting. Real estate is not subject to reporting requirements, as the tax office records it via the real estate transfer tax.
General Reporting Obligation: Movable assets such as cash, jewelry, savings books, company shares, or rights must be reported to the tax office if their value reaches 15,000 Euros within five years.
Increased Limit for Relatives: For gifts to close relatives, a reporting obligation applies from 50,000 Euros per year.
Forced Heirship Share and Gift-Based Forced Heirship Share
Gifts can affect the forced heirship claim of heirs. Spouses, registered partners, and children demand that certain gifts be considered when calculating the forced heirship share.
- For gifts to non-forced heirs, the following applies: If the gift is made more than two years before the donor’s death, it is not considered for the forced heirship share.
- For gifts to forced heirs, there is no time limit. Even gifts made decades ago can be taken into account.
- Disputes can be avoided if other forced heirs are simultaneously compensated during the gift and corresponding waivers of forced heirship claims are agreed upon in writing.
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The crediting of gifts against the forced heirship share occurs in several steps.
First, the gifts made by the deceased during their lifetime are added to the estate. This increases the basis from which the forced heirship shares are calculated. The value of the gift is then adjusted to the time of the deceased’s death.
If a forced heir has received a gift themselves, it will be credited against their forced heirship share, as provided. It is important that this only applies to the additional portion of the forced heirship share that arises from the inclusion of the gifts (the so-called gift-based forced heirship share), not to the entire forced heirship share.
A distinction is made between the forced heirship share from the net estate and the gift-based forced heirship share, which results from the addition of gifts. Considering the gifts leads to an additional amount in the forced heirship share, which is called the gift-based forced heirship share.
Other forced heirs or heirs may request that gifts to forced heirs be considered and credited. Legatees can also demand a credit if they must contribute to fulfilling the forced heirship shares.
Not all gifts are credited. Exceptions exist if the deceased has explicitly stipulated or agreed in writing that a gift is not to be credited.
If the estate is insufficient to cover all forced heirship shares, the donee must proportionally contribute the missing amount, specifically in relation to the value of the gift received.
Forms of Lifetime Gifts
1. Lifetime Gift
The transfer of assets occurs immediately. This is particularly useful if the donee urgently needs the funds at a specific time, for instance, for building a house or starting a career.
2. Gift upon Death
Here, the donor contractually obliges themselves during their lifetime to transfer a specific item only after their death.
- Formal Requirement: Notarial Deed
- Revocation: Only possible with a contractually agreed right of revocation, by mutual consent, or in cases of gross ingratitude by the donee.
- Risk: The estate includes the item and uses it for debt settlement or for payment to forced heirs.
Read more about gifts upon death here: Gift upon Death
Special Considerations for Real Estate
The gift of real estate requires a written gift agreement, signed by both parties. Important security rights for the donor should definitely be noted in the contract and in the land register:
- Right of Residence: The donor may live in the property for life.
- Usufructuary Right: The donor may continue to receive income (e.g., rental income) from the property.
- Prohibition of Encumbrance and Alienation: The property may only be sold or encumbered with the donor’s consent.
Your Benefits with Legal Assistance
Lifetime gifts entail numerous legal and economic challenges. Complex issues often arise concerning reporting obligations, potential effects on the forced heirship share, or the securing of residential and usufructuary rights. Without clear contractual arrangements, later disputes between heirs or financial disadvantages for donors and donees are threatened. Tax aspects and land register entries must also be carefully considered to avoid unintended consequences.
Legal assistance from a specialized law firm like ours provides security, protects against costly mistakes, and ensures that your interests are safeguarded at every stage.
Our law firm
- examines whether the respective legal issue is applicable to your case,
- guides you through the entire procedure or process,
- ensures legally sound structuring and implementation of all necessary steps,
- assists with the calculation, enforcement or defense of claims,
- protects your rights and interests against all parties involved.
