What are the things to remember if you want to give a gift to someone? As a donor, what can you reserve for the recipient? We have prepared an overview of the most common questions that our clients contact us with during the preparation of gift agreements.
Most often, parents or grandparents negotiate when they give the property they live in to their children or grandchildren. note: “Easement” is a designation used today mainly by the Land Registry, easements are one type of such corresponding easement (otherwise the Civil Code no longer uses “easement”, instead there is a similar umbrella term “easement”).
Most often, we prepare a so-called easement of usufruct for a specific person, for the lifetime of such beneficiary. This means that this person (typically the donor, but we have also seen easements prepared for the donee’s mother and her partner) has the right to use the property for the duration of his or her lifetime, even though someone else already owns it due to the gift.
The easement is both agreed in the contract and registered in the land register (this protects the donor in case the donor loses the property due to foreclosure – the right to use the property is not affected). For the purposes of the Land Registry, however, it is necessary to describe the easement accurately enough so that there is no problem with its registration; we submit the proposal for registration of such an easement in the same proposal for entry into the Land Registry as the donation itself – i.e. we deal with it all at once.
We will take care of the whole process for you. We will prepare a precise and tailor-made donation agreement, handle the easement of lifetime, deal with taxes, check the risks associated with insolvency and ensure a flawless proposal for entry into the Land Registry.
We then regularly add specific conditions to such an easement in the contract to specify it. For example, that the easement includes the right to receive visitors in the donated property, that such an easement is negotiated free of charge, i.e. the donor does not have to pay anything for it, or, especially when it comes to the donation of an apartment, then a detailed specification of who, when and how will make payments for the apartment (utilities, house management fees, etc.). This will avoid possible misunderstandings about the most common issues that may arise with the actual functioning of the easement.
There are two “typical” situations under the law where a gift can be revoked by the donor – for the purposes of the contract, these reasons can be reiterated in the contract, but the Civil Code protects the donor by stating that even if the donor waives the right to revoke the gift for these reasons in the gift contract, this will not be taken into account (i.e., as if it did not happen, these two situations cannot be avoided).
For cases where the donee will try to “get rid of” the donated property, e.g. transfer it to another person so that he does not have to return it, the law provides as follows. The donee is obliged to give away at least what he still has of the gift or its full value, i.e. what is left. However, there is an exception to this, where he will be obliged to return the entire property: if he transferred it precisely to avoid this consequence in the event of revocation of the gift or if the revocation was made by the donor and this is called the donor’s ingratitude.
The two situations for revocation are as follows:
We handle what is known as a real easement, which is sort of like a “reverse” easement – when an easement is negotiated, the donee is obligated to tolerate “his” property being used by someone else; with a real easement, the donee is obligated to actively act as agreed in the gift agreement.
An example of this was the real burden we prepared for one of our clients, which served as a so-called exchange. The essence was that the donor, an elderly lady, had, in addition to the easement of usufruct, a real burden inserted in the contract, according to which the donee (her daughter) was to provide or arrange for her care in old age, and even to provide care personally in the event of deterioration of her health.
When transferring real estate, the main thing to be concerned with is income tax ( the tax on the acquisition of immovable property was abolished several years ago). In the past, only the transfer of property for consideration was subject to tax, so gifting is not.
With regard to income tax (which is assessed when ordering the drawing up of a gift deed), gifts from, for example, a relative in the direct or collateral line are exempt from tax, if the relative is a sibling, uncle, aunt, nephew or niece, a spouse, a child of a spouse, a child of a spouse, a parent of a spouse, or, in some cases, a person with whom the donee lives in the same household.
We regularly draw up contracts that relate to several different properties (e.g. an apartment and a separate parking space next to it, or several different plots of land); we have also drawn up contracts that relate to only part of a property (e.g. parents wanting to give half of the house to their children but still keep half). However, it is not always possible to create e.g. an easement over all the properties together – typically it can only be created if the donor is the sole owner.
Tip: Don’t rely on gift deed templates for half of the property. They tend to be outdated and full of errors. Better contact us. We can prepare a deed of gift for you within 48 hours and we can handle everything online. The result is a document whose legal flawlessness is guaranteed by an experienced real estate law specialist.
A deed of gift allows for the transfer of real estate to another person free of charge and the donor can negotiate a number of rights, in particular a lifetime easement, which allows him to continue to live in the property and be protected even in the event of the donor’s execution. According to the Civil Code, a gift can be revoked in two cases – for ingratitude, where the donee intentionally or through gross negligence harms the donor, or for hardship, where the donor is in such financial distress that he or she does not have the means for necessary maintenance. Contracts may also be supplemented by a real burden, i.e. an obligation on the donee to provide care or other assistance to the donor. A gift of real estate is not subject to gift tax – it is treated as gratuitous income, which is exempt from income tax for most relatives. Multiple properties can be registered with the Land Registry in a single deed, provided the conditions are met, and the deed can detail the rights and obligations of all parties, including use, payments or visits, to avoid disputes.
A gift agreement under the Civil Code must contain an unambiguous identification of the donor and donee, a precise description of the gift (e.g. real estate, an item or an animal), an expression of intent to transfer the gift gratuitously and its acceptance. In the case of a transfer of immovable property, the gift agreement must be in writing and the signatures must be officially certified. If the donation contract is a deed of gift with an easement (e.g. a life estate), the easement must be described in detail and registered in the Land Registry. In the case of a gift on death, it is important to know that the Civil Code does not allow this form of gift – a gift on death is null and void and is dealt with in a will or inheritance agreement.
Gift tax as a separate tax has been abolished, but gratuitous acquisitions are assessed under income tax. In practice, therefore, gift tax on immovable property means income tax on gratuitous income, which is usually exempt for close relatives. If the exemption does not apply, the income from the gift must be reported on the return. In the case of real estate in insolvency or a gift just before insolvency, the gift may be challenged by the insolvency administrator as an ineffective legal act.
The cost of drawing up a deed of gift varies according to the complexity of the case – a simple deed of gift of real estate or a deed of gift with an easement is usually more expensive than a simple gift of movable property. The cost of drawing up a donation agreement can be several thousand crowns depending on the scope of legal services, while the price of a notary for notarizing signatures is usually CZK 30 per signature. If the notary directly draws up the contract, the fee is governed by the notary’s tariff and may be higher, especially for real estate. It is recommended to compare the price of a notary and the price of a lawyer according to the needs of the specific situation.
Yes, there is a basic gift agreement template available free of charge, but for gifts with a higher value (e.g. real estate or a gift agreement with an easement) the use of a universal template is not recommended. The template usually does not address detailed terms, rights and obligations of the parties, tax risks or situations such as insolvency or prohibition of alienation. For a gift of lesser value (e.g., a gift agreement for a dog or other movable property), a template may serve, but it is always advisable to check that it meets the requirements of the Civil Code.
A gift can only be revoked in two cases – for ingratitude or for the donor’s distress. If the donee behaves rudely towards the donor or deliberately harms the donor, the donor may demand the return of the gift. In the case of a gift of real estate in insolvency, it is important to know that a gift agreement entered into shortly before bankruptcy may later be challenged as an ineffective legal act. The insolvency practitioner can demand the return of the gift or its value to protect creditors. It is therefore advisable to consult a professional in times of financial difficulty.
We will provide you with a complete legal service related to real estate donation, including a proposal for entry into the Land Registry. We will also advise you on how to deal with taxes in the most advantageous way. We will handle everything quickly and flawlessly, so you don’t have to worry about a thing. You can pay after the service has been provided.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
In person and online. Just choose the appropriate service or opt for an independent consultation when you are unsure.
