Parents often choose to give their house or apartment to their children. Unfortunately, however, we also encounter cases that do not go smoothly – the donation of property sometimes inflames already strained relationships and the donor does not know how to get out of it. So what are the downsides of gifting property and what should a good contract contain?
The donor usually transfers the property, which is often the donor’s only home, to the donee. Although he or she is giving it in good faith, he or she wants to make sure that he or she will be able to continue to live in the house or apartment with dignity. The most common and also the most sensible solution is therefore to establish a lifetime easement, sometimes also referred to as a usufruct. We therefore recommend that the donor’s survival easement (usufruct) be included in the gift agreement itself and that it be registered in the Land Registry at the same time as the new owner.
Sometimes easements and their conditions are quite complicated, but the meaning is clear – no one can then evict the donor from the apartment or house against his will, even if he is no longer the owner.
Increasingly, however, we are seeing cases where the donee needs financing and is trying to mortgage the property with a bank. Banks, however, are not interested in granting mortgages on houses or flats that are encumbered by a lifetime easement. Therefore, the donor should know that while the easement protects him or her, it significantly reduces the value of the property and limits its marketability. It is therefore important to consider in advance whether gifting property with an easement will affect the donee’s plans. Donating at a time when the donee has debts or is facing insolvency can also bring its own complications. In fact, a donation in insolvency may result in the gift being returned to the estate and sold to pay the debts. For this reason, we also recommend consulting the insolvency register before the transfer.
By its nature, a donation is an act of goodwill which is usually not repayable. However, the Civil Code does provide for two situations in which a return of a gift can be requested. The first is the so-called revocation of a gift for ingratitude. These are cases where the donee intentionally or through gross negligence harms the donor. Most often, this is a failure to provide necessary help for a serious illness, severe abuse, violence, or prolonged blatant disregard. Thus, it is not an ordinary quarrel in the family, but a really serious violation of the moral obligations of the donee.
The second reason is the withdrawal of a gift for hardship, where the donor finds himself in a situation where he has no means to meet even the basic needs of himself or his dependants.
Tip: Most gifts have a rather symbolic value. You can give your friend a book, silver earrings, sometimes you might “slap your pocket” and give your loved one a watch. But in case of a later mutual misunderstanding or quarrel, you simply wave your hand over it. That just happens sometimes. But what if you give something really big? Like a car or a property for your offspring’s graduation? And a year later, you regret it. Can you revoke the gift? And what do you do if you’re on the donor’s side and the donor wants the gift back?
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.
The donor has a period of one year to revoke (withdraw) the gift from the moment the donee has wronged him/her. The exception is if the donor has harmed the donor indirectly or a person close to the donor. In such a case, the time limit starts to run from the moment he became aware of this. In some cases, the right to revoke the gift even passes to the donor’s heirs. This is the case if the donor prevented him from revoking the gift before his death. Naturally, this can also be an extreme situation where the donor is killed or mutilated by the donee.
A gift of real estate requires by law a written contract, which must be notarised. Only the owner of the property can make a gift. The recipient (donee) is the person who receives the property as a gift.
Ownership of the immovable property is only established when you enter the donation agreement into the Land Registry. According to the Cadastral Act, the legal effects of the entry occur on the basis of a final decision on its authorisation at the moment when the proposal for registration has been delivered to the competent cadastral office.
However, the donation agreement itself is not just a formality. It is necessary to precisely describe the real estate to be transferred, provide the identification data of the parties, the usual price (if required by the authorities or banks), settle the easements, state any conditions and regulate the method of delivery.
In addition, the addition of a revocation clause is increasingly being addressed to avoid future disputes.
As regards the cost of drawing up a gift deed, this is usually between two and ten thousand crowns, depending on the complexity. More complex contracts with easements, conditions or multiple donees may be more expensive. Many people look for a free model gift agreement, but these models tend to be inaccurate, out of date and often do not address key issues such as easements, insolvency or donor protection. While the Civil Code defines the general elements of a gift agreement, the specific wording needs to be much more precise in practice.
Notary fees vary according to the value of the property and the extent of the act required. Donation contract notary price can range between three and eight thousand crowns. The advantage is that the notary guarantees the accuracy of the certification, but the notarial record is not obligatory.
What if the donor favours only one of the descendants by transferring the apartment? A gift can indeed interfere with the inheritance. What the descendants of the deceased have received free of charge in the three years prior to his or her death (this period can be extended in the will ) counts towards the mandatory share of the estate. However, the usual gifts (e.g. Christmas presents) are not taken into account in this way. In practice, one can imagine a situation where a mother gives one of her three sons an apartment worth CZK 6,500,000 shortly before her death. She then leaves only cash of CZK 300,000 and movable assets of virtually zero value in her estate. Each of the sons would be entitled to CZK 100 000 from the estate. However, one has already received an apartment far in excess of that value, so he will receive nothing and only the other two will share. However, this does not compensate them for the total “loss”. On the other hand, the formerly gifted son does not have to worry about having to divide the gifted apartment or pay his siblings back.
Therefore, the donation should be well thought out and the gift agreement should not be underestimated.
Gift tax is no longer payable. Therefore, only income tax is applicable. The donor does not have any income, but loses the property, so there is no tax liability. However, the donor receives income. However, if the transfer is within the family (e.g. within the family), it is also exempt from tax. If not, he includes the gift in his full-year income and taxes it together with his other earnings.
Familiarize yourself with our offer and treat the risks involved in gifting real estate.
Tip: Parents often choose to give their house or apartment to their children. This is cheaper than the cost of settling the estate in probate. In addition, they have control over the division of their assets among their children and can avoid arguments over property. Unfortunately, however, it also happens that gifting property will inflame already strained relationships. In such cases, it pays to set up an easement. How to do it? This is the subject of a separate article.
A deed of gift of real estate is still one of the most common ways of transferring property between parents and children, but it comes with a number of pitfalls that must be addressed when the agreement is drawn up. Fundamental is the protection of the donor through a lifetime easement, which guarantees the right to continue to use the property, although it also reduces the market value and makes it difficult to finance or sell. The gift can be revoked in certain circumstances, either because of the donor’s ingratitude or because the donor is in need, and the law provides for a one-year period to exercise the right. Donations also have a significant impact on inheritance, as the value of the gift counts towards the heirs’ mandatory share, which can lead to an unequal distribution of the estate. The deed of gift must be in writing, precise and supplemented by certified signatures and, where appropriate, provisions on easements or possibilities to revoke the gift. A notarial deed is not obligatory, but may be appropriate, and the cost of drawing up a deed is usually in the order of several thousand crowns. There is no longer a gift tax, but the donee may be obliged to tax the gift as income, unless the donee is a close person. Complications may also arise in situations related to the insolvency of the donee or when using outdated free model contracts. Overall, gifting real estate is safe and advantageous when the contract is carefully drafted with future risks and family relationships in mind.
The gift tax as a separate tax no longer exists, however, the estate gift tax is now assessed as part of the income tax. If the gift agreement is concluded between close persons, the gift is exempt from tax. For other persons, the gift agreement may be taxable and the donee must report the gift in the tax return according to the rules set out in the Civil Code and the Income Tax Act.
The donation contract price is based on the complexity of the transfer, especially if the contract contains easements or conditions. The cost of drawing up a donation agreement usually starts around two to three thousand crowns, more complex agreements can cost more. If a notary is needed, the donation contract notary price varies between three and eight thousand crowns depending on the value of the property and the scope of the acts.
The free model of the gift agreement is usually only general and does not contain important elements required by the Civil Code or the Land Registry rules. Such a model does not usually address easements, revocation of the gift, insolvency risks or protection of the donor. Therefore, the model gift agreement is only suitable for very simple transfers without specifics; for real estate, its use may lead to errors or disputes.
A gift on death is invalid under the law because a deed of gift can only transfer property during the donor’s lifetime; a will must be used to transfer property after death. With respect to a gift deed of insolvency, transfers to a person in insolvency may be challenged by the insolvency trustee as acts without adequate consideration and the gift may revert to the estate.
The donation contract for a dog is governed by the Civil Code just like donating any other item, but you need to provide identification of the dog, a vaccination certificate and make a change in the breeders’ register. For real estate, on the other hand, it is common to negotiate a deed of gift with an easement so that the donor can continue to use the property. Although both agreements are based on the same statutory framework, the practical requirements differ significantly.
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.
Parents often choose to give their house or apartment to their children. This is cheaper than the cost of settling the estate in probate. In addition, they have control over the division of their assets between their children and can avoid arguments over property. Often the donor has no house or apartment other than the one they are transferring to their children. He or she wants to continue to live there with dignity. This situation can easily be resolved by including an easement in the gift deed itself , or an easement for the donor's survival, and having it registered in the Land Registry at the same time as the new owner.
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