The possibility of advancing inheritance in life, with the donation of real estate to children, had been hampered by the new Civil and Commercial Code, but its new enforcement is now law and was published in the Official Gazette.
This law allows donations to become a viable instrument again and guarantees the legal certainty of Argentines. After its promulgation, the law will allow Argentines to dispose of their assets in life without fear of affecting legal security and without the risk that the donated real estate will lose commercial value or cease to be suitable to be taken as a bank guarantee.
With this new norm, donations of real estate will once again be a viable instrument to dispose of assets in life, transmitting real estate to children free of charge, said the notary public Adrián Comas and the lawyer Matías Comas.
The project began with the proposal of Senator Mario Pais and was promoted by the work of the Association of Notaries of the City of Buenos Aires, provincial associations, the Federal Council of Notaries and non-profit institutions, who, through joint work, were articulating with the different political expressions on the importance of this legislative change.
Real estate donations will impact the real estate sector and will also encourage many to leave their material legacy in life, thus avoiding the higher costs of a future estate.
From the Association of Notaries of the City of Buenos Aires they remarked that with the sanction "the labyrinthine legal system of donations is put to an end, which obstructs the circulation of goods and, clearly, promotes constitutional precepts such as property and the human right of access to the house".
With this modification, all forced heirs will continue to be protected, only now if there is a donation that affects their rights, other mechanisms can be used on the death of the donor.
The other heirs may compensate the affected heir with values, through the collation action instead of the reduction action that had a direct impact on the donated property, even if it had been sold. The rights of third parties who have acquired goods that had been donated, if they are in good faith and for valuable consideration, are also protected.
For this reason, it is expected that several properties will re-enter the real estate market and donations will be made again, an action that, as was said, is strongly rooted in local customs.
Legal certainty is not affected
With the law there will no longer be fear that legal certainty will be affected and that donated real estate will lose commercial value or cease to be suitable to be taken as a bank guarantee, Comas and Comas explained.
Experts reported that free donations of real estate from parents to children were peacefully accepted for more than 100 years, considering them inheritance advances.
When the donor died, the heirs could only make claims among themselves and not against whoever had bought the property from the original donee, Comas y Comas remarked.
And they even added that there were very few in all those years the legal cases for claims of some heirs because others would have been more benefited by the donation in life.
But, in addition, in this way the property titles were not observable by a notary, as were the donations of real estate to non-legitimate third parties, that is, to those who were not the forced heirs of the donor, Comas and Comas specified.
What's new in the Code
With the new Civil and Commercial Code that entered into force in August 2015, this centennial criterion was changed, and it was established that it could also be brought between legitimate co-heirs and against those who acquired the real estate from the donees, Comas and Comas added.
As a result, both donations from parents to children and donations to third parties were observable titles, and would continue to be so for the following periods:
-For 10 years counted from the donation/possession.
-Or for 5 years counted from the death of the donor.
They ceased to be observable with the fulfillment of the first of these two deadlines, the experts specified.
This greatly complicated the real estate market and the circulation of those titles, and hindered the understandable wishes of parents, to be able to advance their inheritance, and transfer their properties to their children while they were alive, Comas and Comas emphasized.
But, understanding that "donations from parents to children are a deep-rooted and highly valued custom in our country", Congress approved the modification of some articles of the new Code, again resulting in "non-observable titles for donations from parents to children" .
The possibilities that open
Each family will be able to reconsider the possibility of making "inheritance advances", through free donations of real estate, passing them from one generation to the next with the following variants, Comas and Comas specified:
-Donate them to all the children in equal parts in condominium.
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-Go donating a property to each one and at different times.
-Donate only the "bare property" (naked property, empty of content), reserving the real right of lifetime usufruct (use and enjoyment: if you have to live, I live, if you have to rent, I rent it and collect it myself).
Real estate can be donated from parents to childrenIn case of resignation in life, or death of the usufructuary, the property does not enter succession, but the Real Property Registry is simply notified of the death with the death certificate registered in the Registry of Civil Status and Capacity of Persons .
Upon such presentation alone, the Property Registry cancels the annotation of the usufructuary, thus leaving the owner of the domain (the donee son) as the owner of the full domain automatically.
What happens if there are differences at death
At the death of the donor, his heirs will verify the assets left to inherit, and if there is no will with improvements to any within the available portion, which is one third of the estate, all children must inherit equally, Comas recalled. and Commas
In case of differences, the values of the donated goods are collated, claiming the values only from their siblings, but not having the right to take legal action against any third party purchaser, purchaser in good faith and for valuable consideration.
The tranquility in the circulation of said property titles is precisely based on that, the experts emphasized.
Yes, for the periods of 5 and 10 years referred to, all the remaining free donations of real estate, which are made in favor of third parties, will remain as observable, the usual ones being donations from grandparents to grandchildren, from a single aunt without children to her nephews, from one person to another by affective ties, among others, said Comas and Comas.
Other operations
This will also greatly facilitate the formalization of similar operations, which, as they ended up linked to real estate, created some doubts in their notarial acceptance, for example:
1. The free transfer of a ticket for the sale of a property, signed by the purchasing father in favor of his son as assignee, so that the seller would notarize the property as a sale directly to the son.
2. The donation of cash from the father to the son so that the latter could buy the property.
3. The free assignment of a "contractual position" in a real estate construction trust, from the father as trustee beneficiary, in favor of the son as assignee, so that the real estate of the trust would be transferred directly to the son.
4. The appointment of the son as trustee in a real estate administration trust, so that the property contributed to the administration trust is "returned" not to the contributing trustee father, but to the trustee son.
5. The free donation of shares in an SA in liquidation, from the parent shareholder awarded the property by liquidation, in favor of the son who has done the shares, so that the property is awarded directly to the son.
6. The free transfer of hereditary and marital rights, total or partial, carried out in succession by the surviving spouse in favor of their children, so that the reported property within the estate of the deceased is registered in its entirety to name of the heir children, thus avoiding the future succession of the surviving spouse.
what taxes are paid
1. In the scope of the AFIP, if a human person acquired a real estate property as of January 1, 2018, when in the future he decides to sell it, he will no longer pay the ITI, (tax on the transfer of real estate), which is 1.5% of the sale price, but the schedular Income Tax.
In the scope of AFIP, the ITI or Income Tax is paidThis schedular tax is 15% calculated on the difference between the sale price and the purchase price updated by the legal index, and is paid in the annual affidavit. There is no withholding and payment on account system when signing the sale, Comas y Comas pointed out.
However, even if the free donation of the property was later, if the purchase of the property by the donor was prior to 1/1/2018, when the child decides in the future to sell the property, the ITI will continue to be taxed and this future sale will not enter. in its earnings statement, even if it is done many years from now, the experts said.
2. In the area of the province of Buenos Aires, as in Entre Ríos, there is the ITGB, tax on the free transfer of goods, which taxes free transfers due to death (inheritance) and for inter vivos acts (donations ), expressed Comas and Comas.
In Buenos Aires, the inheritance tax applies in the following cases:
-Properties located in Buenos Aires territory.
-Automotive companies based in the province.
-Cash or foreign currency if it was deposited in a bank account at a branch or headquarters located in Buenos Aires.
-Participations in companies registered in the province.
But, Comas and Comas stated, the Buenos Aires inheritance tax also aims to reach other cases that are more debatable, such as the following:
-Participations in companies located outside the province, but within the company's equity there are assets located in the province, such as real estate or automobiles, and in the proportion of said assets within the total equity of the company.
-Also when any of the assets was located outside the province, but the heir or donee had his domicile in the province.
The experts exemplified with a donation of a property in the city of Buenos Aires, with the donor father domiciled in the city, in favor of two children, one domiciled in the city and the other in the province of Buenos Aires. In this case, the Buenos Aires tax aims to reach the donee with domicile in the province.
"It is very important to merit this provincial tax, and especially the way of writing and documenting, when these free donations are made from parents to children, as inheritance advances," Comas and Comas concluded.
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