On 30.7.2015, the Inheritance Law Amendment Act 2015 was promulgated in BGBI I 2015/87. Most of the provisions of the reform come into force on 01.01.2017. The following article deals with the dedication of assets to a private foundation and the resulting deduction from the compulsory portion.
Section 781 of the Austrian Civil Code (ABGB), which has been in force since January 1, 2017, now expressly regulates the addition and inclusion of gifts/dedications of assetsto a private foundation. The beneficiary under foundation law is included in the assets entitled to a compulsory portion. The foundation is not a person entitled to a compulsory portion, meaning that the two-year period is relevant when transferring assets to the foundation. This period generally begins to run from the date on which the donor has definitively transferred the items to the donee and the donor therefore no longer has any further rights of disposal.
According to the new legal situation, in addition to any dedication of assets to a private foundation, the granting of the position of beneficiary of a private foundation, insofar as the deceased has dedicated his or her assets to it, will in future also be deemed to be an imputable gift. Beneficiaries of the private foundation who belong to the group of persons entitled to a compulsory portion must therefore in future have these donations offset against their compulsory portion – for an unlimited period of time.
However, there is no double consideration as a gift to the private foundation and the granting of the beneficiary position, which also includes the value of the previous and future distributions to the beneficiary. Only the assets of private foundations that were dedicated by the deceased are taken into account.
In principle, all distributions that the beneficiary has received up to the death of the testator and will receive after the death of the testator must be taken into account by the beneficiary entitled to a compulsory portion and thus added to the estate. The addition is the arithmetical addition of the value of the gift to the estate. The beneficiary position depends on the beneficiary ‘s influence on the foundation bodies and distribution decisions.
Economic transfers of assets, such as succession arrangements in partnership agreements, donations to a foreign foundation, etc., can also unilaterally benefit the beneficiary from an economic point of view (cf. § 781 para. 2 no. 6 ABGB).
Conclusion:
Beneficiaries entitled to a compulsory portion must have donations that they have received as beneficiaries from the deceased’s private foundation offset against their compulsory portion as a gift. It is unclear how to calculate what the beneficiary entitled to a compulsory portion will still receive after the inheritance. The beneficiary must allow these estimated future gifts to be offset against the compulsory portion, but on the other hand cannot legally enforce future payments from the private foundation itself.
Establishing a foundation is not per se a suitable way to exclude existing compulsory portion claims. Only in conjunction with an inheritance law provision such as a waiver of a compulsory portion can the inheritance assets actually be separated. Or through the application of foreign inheritance law.
Jeannée Mikula Attorneys at Law will be pleased to advise you in connection with inheritance and foundation law issues.