What is a gift contract?
With a gift contract, one person (donor) commits to gift a certain thing or right without any compensation to another person (gift recipient). It is a non-encumbered legal transaction, such a contract that creates an obligation for only one contracting party. It is interesting that this contract is not regulated by the Law on Obligations, but by the Serbian Civil Code from 1844.
What can be the subject of a gift contract?
The subject of a gift contract can be:
-movable property: money, jewelry, car, furniture, etc.
-immovable property: apartment, house, garage, field, etc.
-right: a share in a company, a claim for a certain amount of money, or some other property
-debt forgiveness
A gift contract can be:
-with immediate performance of an obligation- transfer of real estate
-with permanent performance of an obligation- eg payment of a certain amount of money every month in a certain period
-with a specific order or burden that imposes certain duties on the recipient, but not to the extent that this legal transaction turns into a burden. In practice, the most typical is the gift of real estate with the retention of lifetime usufruct or with the agreement of the obligation to take care of the donor.
An example of a typical gift in practice is renunciation of the inheritance in favor of one of the co-heirs in the probate procedure.
Is a written form necessary for a gift contract? The answer to this question depends on the item being given away. If it is real estate, then for the transfer of ownership rights, it is necessary to conclude a contract in written form, which will then be solemnized by a notary public. When it comes to movable things, it is enough that the thing has been handed over, with, of course, the unequivocal intention of gifting, in order to consider that a gift has been made. Although movable property can be gifted without a written contract, it is recommended to prepare written evidence in the event of a dispute.
Can a gift be revoked?
Termination of the gift contract can be by agreement in cases where the contract has been concluded but not executed. The gift can be revoked, that is, the gift contract can be terminated for the reasons prescribed by the contract itself (which must be in accordance with compulsory regulations, public order and good customs) or for the following reasons:
- ingratitude (so-called “gross ingratitude”) of the recipient towards the donor or a person close to him
- impoverishment of the donor to the extent that he does not have the necessary means to live or to support the person he is legally obliged to support
- divorce or annulment of marriage, which is regulated by the Family Law, if the value of the gift is disproportionately large in relation to the joint property, whereby the usual gifts made during the marriage are not returned
- non-fulfilment of the burden- if the recipient does not fulfill, for example, duty of care
Third parties have the right to request the revocation of the gift, namely the donor’s creditor, the person to whom the donor has an obligation to support, as well as the necessary heir.
When the donor is an elderly person, it is preferable to undergo a medical examination by an expert psychiatrist before concluding the contract, so that there is no doubt that the donor was capable of reasoning.
Is the gift included in the inheritance?
Gifts made to legal heirs are included in their inheritance. This calculation is done by the fact that the legal heirs to whom the testator did not give anything during his lifetime receive, upon request, the appropriate value from the legacy (the value of the gifts made), and then the rest of the legacy is divided among the heirs. However, gifts for which the testator declared at the time when it was made or later in the will that the gift is not included, or it is evident from the circumstances of the case, are not included. This does not affect the rules in the necessary part. The usual smaller gifts and the costs of maintenance and compulsory schooling are not taken into account.
Is it possible to give someone something against their will?
The answer is: no. For the gift to be valid, the recipient’s consent to receive the gift is also necessary.
Is tax payable on the gift received?
In principle, tax is paid on the received gift, in accordance with the Law on Property Taxes. If parents, grandparents or brothers/sisters receive a gift, they pay a tax at the rate of 1.5%, while distant relatives and those who are not related to the giver pay a tax of 2.5%. Gift tax is not paid by children, grandchildren and the donor’s spouse.
Can a gift contract be voided due to mistake or fraud?
Yes, like any contract, it can be contested due to lack of will (misconception, fraud, coercion)
Can I gift only part of the property?
Yes, you can gift only the ideal part of the property, e.g. one half, one third or similar.
Can there be two gift givers or more gift recipients?
Yes, the contract can have several participants on both sides, which often happens in family relationships.
The legal framework of the gift contract must be clear and secure for both parties. Before entering into a gift contract, consult an experienced contract lawyer, especially if it involves a larger value, real estate, or family in conflict.
Danilo Babić- lawyer in Novi Sad
