SUMMARY OF THE ARTICLE
1. What an excessive gift is and when it may affect inheritance
In Spain, a gift is considered excessive when its value exceeds what the donor could freely dispose of without affecting the forced heirship rights of their heirs. This limitation is set out in sections 636 of the Civil Code. Not every gift gives rise to this issue: only those which, when the estate is calculated, exceed the donor’s disposable portion of the overall estate.
2. Who may claim and how the excess is calculated
Only heirs entitled to a forced share may request reduction: descendants, ascendants and the surviving spouse. The calculation is made at the time of the donor’s death by adding the value of the estate assets to the value of lifetime gifts. Where there are several excessive gifts, reduction is carried out starting with the most recent.
3. Effects of reduction and applicable time limits
An excessive gift is not invalid in its entirety, but only to the extent that it exceeds the legal limits. The time limit to bring a reduction claim is five years from the donor’s death. Reduction does not affect third-party purchasers acting in good faith, but it does bind the donee directly.
In Spanish law, there are certain family members (children, parents, the surviving spouse…) to whom the law reserves a portion of the estate. This share is known as “legítima” and is specially protected. In this article, we look at what happens when, in an inheritance subject to Spanish law, the deceased made a lifetime gift that harms the shared reserved to the forced heirs.
What is an excessive gift? Article of the Spanish Civil Code.
The Spanish Civil Code sets a clear limit on the freedom to make gifts. No one may transfer by way of gift more than they could dispose of by will. When this limit is exceeded, the gift becomes ineffective/excessive to that extent.
Art. 636 of the Civil Code states: “No one may give or receive, by way of gift, more than he or she can give or receive by will. The gift shall be ineffective insofar as it exceeds this limit.”
Although a gift takes effect once it is perfected (meaning the donee enjoys the asset gifted to him/her), issues may arise upon the donor’s death.
When can a gift be excessive? The calculation.
To determine whether a gift is ineffective, a calculation is carried out at the time of the donor’s death. The value of the estate left at death (after deducting debts) is added to the value of any “relevant” lifetime gifts. The result is a notional base used to determine the heirs’ reserved shares (legítimas). Only then can it be assessed whether the gifts exceed, or not, the limit.
If the donee is a forced heir (child, grandchild, ascendant or spouse), the gift is first set against their strict reserved share. If there is any excess, it may also be set against the improvement share, depending on the circumstances. Only any remaining balance is attributed to the freely disposable portion. Only where, after this allocation, the reserved shares of other forced heirs are affected, will the gift be considered ineffective.
If, on the other hand, the donee is a third party, the gift is allocated solely to the freely disposable portion. Any excess over that portion will be ineffective.
Who may claim reduction and in what order?.
Under art. 655 of the Spanish Civil Code, only those entitled to a reserved share may request reduction:
- Descendants (children and grandchildren)
- Ascendants (parents and grandparents)
- Surviving spouse
- Their heirs or successors
Where there are several ineffective gifts, reduction is made starting with the most recent. If necessary, bequests may also be reduced.
What happens when spouses have multiple properties?.
An ineffective gift is not void in its entirety but only reduced to the extent of the excess. The prevailing view is that the time limit to bring a reduction action is five years from the donor’s death. Reduction directly affects the donee, without prejudice to the protection granted by law to third-party purchasers in good faith.
Conclusion.
A gift that affects inheritance rights may be challenged by forced heirs. If you find yourself in this situation, whether as an heir whose entitlement has been reduced or as a donee facing a claim, White & Baos Lawyers can assist you. We are specialists in civil and succession law. Do not hesitate to contact us. When a law other than Spanish law applies to the succession, the specific case will need to be analysed on its own merits.
The information provided in this article is not intended to be legal advice but merely conveys information relating to legal issues.
Carlos Baos (Lawyer)
White & Baos.
Tel: +34 966 426 185
E-mail: info@white-baos.com
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