What exactly is a deed of donation?
A deed of donation is a legal document binding the donor to transfer the ownership of a particular object to the donee(s), who, in order to complete the legal act, must consent to the donation
It’s also possible to donate without a document in writing – both parties enter into a deed of donation simply by handing over the gift and accepting it. However, this article discusses property donation, in which case a written deed with attested signatures is always required.
The ways to donate property
- Any number of donees – if you own property separately, i.e., outside the bounds of matrimonial property, you may gift it to any number of various donees: A third party, your relatives, only one child, or all of your children together with your wife, etc.
- Various shares – For example, while your daughter may be given half of the property, your two sons can receive a quarter each. The size of the shares is always only up to the donor, that is, the property owner. It’s essential, however, to precisely define the shares in the deed of donation as well as when transferring the property at the Land Register. Moreover, it needs to be explicitly stated that the property ownership will be proportionately joint.
Gifting property between spouses in the regime of matrimonial property
Many of our clients wish to donate real estate to their spouse. However, this is complicated by matrimonial property. What are the things to bear in mind here?
Matrimonial property, also known as marital property or community property, refers to most property acquired after the marriage by either one of the couple. It means that whatever one spouse obtains equally belongs to the other. This includes the car that the husband bought after the wedding as well as his salary. Debts also represent an unwelcome part of marital property. We’ve written a separate article about what is and what isn’t a part of community property.
Property donated the right way
Even a trivial error in the property transfer application can cost you the flat, not to mention a mistake in the deed of donation. Play it safe and ensure that the donation to someone close to you will go exactly as planned.
I want a guarantee that the donation will go as it should
Going back to real estate, matrimonial property includes:
- Any real estate obtained by one or both of the couple during their marriage,
- any profits from their separate property – for instance, if the wife separately owns a flat, because she had purchased it before the wedding – the rent she receives counts as marital property.
- Any real estate donated explicitly to their community property – otherwise, the gift will fall into the category of joint ownership.
Matrimonial property doesn’t include any real estate:
- gifted to one of the couple,
- inherited by a spouse,
- a spouse acquired with money in their separate property. To illustrate, if a husband sells a house that he inherited from his parents and uses the money to buy a new one, the new house will remain a part of his separate property.
- one of the couple obtained as damages for their separate property,
- purchased with money saved before the wedding; this may be substantiated with payroll records, account statements, e-mails, witnesses, etc. – any form of evidence is acceptable.
Following from this, a real estate donation between spouses is possible only if it isn’t a part of matrimonial property. However, an alternative exists: to reduce marital property by means of a notarial record. The real estate thus excluded from community property may then be donated.
Gift giving real estate excluded from matrimonial property
Reducing matrimonial property, or, in legal terms, the contract of statutory matrimonial property regime modification, can be signed if a property is to belong to a sole spouse, and may encompass a donation as well as various other situations.
A married couple may wish to reduce their matrimonial property when:
- The property they’re purchasing is to belong to a sole spouse; a bank may require this for the sake of credit worthiness;
- one of the couple doesn’t wish to bear the risks connected with taking a mortgage.
If the couple wishes to donate property between them in this way, they need to record their contract of reducing community property at the notary.
What to keep in mind when donating real estate in the regime of matrimonial property
- Property donation is legal only if owned separately – the real estate was purchased prior to the marriage, was inherited or given to one of the spouses.
- Czech law doesn’t allow for gifting a part of matrimonial property between spouses. However, it can be achieved by reducing marital property and excluding a particular real estate from it. Such property may then be transferred by signing a deed of donation. You may also decide to reduce your community property if you seek to protect your spouse from the bailiff.
Donating separately owned property
Let’s consider a model situation: A husband seeks to gift to his wife a part of a separately owned flat that he had purchased before the wedding. He has two options: To enter into a deed of donation with his wife and transfer a portion of the flat to her. Thus, after the new ownership rights are transferred at the Land Register, the flat will be owned by both of the couple in the regime of proportionate joint ownership.
Or, he and his wife may sign a postnuptial agreement, in which they will agree that the matrimonial property will include the flat. Subsequentially, they’ll sign the notarial record upon which the ownership rights will be transferred at the Land Register.Gifting property to a third party.
Gifting property to a third party
Unless the married couple choose another method of property transfer, e.g., a purchase agreement with a third party, they must donate property jointly, that is, they both must consent.
Any person may become the donee – most frequently, this will be the children or parents. Read this article and familiarize yourself with what to bear in mind when gifting property.
The whole real estate or its part can be donated. In the latter case, an ownership share will be gifted – for instance, parents may wish to donate to their children an ownership share of their house equal to one half, while retaining the other half as a part of their marital property.
Gift giving real estate to become a part of matrimonial property
In 2014, the Czech civil code introduced the possibility to gift give real estate to become a part of marital property. Previously, any real estate to be counted among matrimonial property had to be purchased. Nowadays, however, you can, e.g., donate property to your daughter and her husband so that they share it in the regime of community property. You can do so by explicitly stating in the deed of donation that the respective party acquire the realty as a part of their community property. Moreover, you must include this statement in the application with the Land Register when transferring the ownership rights.
If a married couple has reduced their matrimonial property, they may obtain real estate only in the regime of proportional joint ownership, where each of the couple will hold one half of the realty, and the Land Registry will record the ownership thus.
The couple manages such property jointly, also equally sharing the obligations stemming from it, e.g., repair costs or settling a debt connected with it – in this case, the creditor is entitled to demand either member of the couple to pay up in full. Any spouse may treat their share in any way they deem as fit; if the wife wanted to make things difficult for her husband, she could sell her share to a third party without his consent. The property is managed according to the ratio of shares, and common issues are decided by the majority. If, however, the shares are equal, such management may prove difficult unless both spouses come to an agreement. If they are unable to, they will have to take the matter to the court.
The errors that our clients often make when gift giving property
- Registering the property – the ownership rights can be transferred at www.cuzk.cz; alternatively, you can print the application, fill it in by hand and deliver it (in person or by post) to your local Land Register office. Of course, you can also make use of your electronic signature and the data box. The signatures on the form needn’t be attested, and the donor’s signature should suffice. However, we strongly advise to have the form signed by the donee as well to ensure that the Land Register won’t refuse to transfer the property due to a missing statement of will to accept the gift. Enclose the deed of donation and a 2,000 CZK fee stamp to the application.
- Disregarding the right of first refusal – if you’re gifting a property in a proportionately joint ownership, you must first offer it to the co-owner. Keep in mind, however, that the first option to buy only concerns you if you’re gift giving a property to a person other than a close relative
When can you disregard the first option to buy?
Czech law defines a close person thus:
“A close person is a relative in the direct line, sibling and spouse or a partner under another statute governing registered partnership (hereinafter a “partner”); other persons in a familial or similar relationship shall, with regard to each other, be considered to be close persons if the harm suffered by one of them is perceived as his own harm by the other. Persons related by affinity and persons permanently living together are also presumed to be close persons.”
Simply, you can disregard the pre-emption right with:
- A wife or husband,
- a registered partner,
- your and your spouse’s siblings,
- children and step-children,
- your and your spouse’s parents,
- a daughter-in-law or son-in-law,
- relatives with whom you share your household.
If you wanted to donate property to:
- An uncle or aunt,
- a cousin,
- a nephew or niece,
- other relatives,
you would have to meet the condition of greater closeness – see the quotation above: If that person suffered a harm, you would perceive it as your own.
- Easement – is primarily used when donating property to your children to ensure that you’ll be able to peacefully spend the rest of your life there. Read more about easements in a separate article in which we answer some questions frequently asked regarding the deed of donation.
- Real estate tax – donations among relatives are exempt from income tax. The donee doesn’t pay the tax and needn’t state the gift in their tax return. As any deed of donation is always delivered to the tax office as well as any contract of real estate purchase, it is recommended to explicitly state the nature of your relationship in it. Bear in mind that the one and only obligation of the donee is to report the donation to the tax office if they personally estimate that its value might exceed 5 million crowns. Failure to do so can result in a fine amounting up to 15% of the gift value.Revoking a donation – in our practice, we often encounter gift revocation, or, rather, the call for it. Truthfully, the Czech civil code allows for a gift to be revoked only under two circumstances: Revocation of gift due to gross ingratitude or revocation of gift due to destitution. The particular conditions are discussed in more depth in our FAQ on the purchase contract.
Tip: Have you managed to complete the transfer? An extract from the Land Register will confirm it.
Divorce and its impact on gifted property
An important fact to bear in mind when donating property between spouses is that any property gifted to a spouse will remain in their possession after the eventual divorce; in other words, it will not be subject to matrimonial property division during the divorce suit.
What happens if you’re getting divorced while living in a house separately owned by your spouse? Such a house doesn’t fall into marital property and won’t be subject to property settlement during or after the divorce. Quite often, however, one of the couple invests a considerable sum in the house. During the property settlement, they may raise a claim to settle property investments, i.e., to get back the money spent on the real estate. If the other spouse challenges this, they must provide evidence (ideally the receipts, invoices, etc.) that the money was indeed invested thus.
We’ll be happy to help with donating property between spouses
If you find yourself in one of the above situations, for instance, if you’re considering gifting property to a spouse, we’ll gladly assist you. We’ll tailor the deed of donation to your needs; furthermore, we’ll apply for the transfer of the property at the Land Register and advise whether it might be to your benefit to enter into a postnuptial agreement (or a prenuptial agreement). And, last but not least, we’ll gladly provide counsel regarding property settlement after the divorce or the eventual reimbursement for investments in the spouse’s separate property.