Property donation during one’s lifetime
Property donation during one’s lifetime, known as a living donation, offers a streamlined and cost-effective alternative to traditional inheritance processes. It presents a mutually advantageous option despite its mixed benefits and drawbacks, often outweighing potential disadvantages with well-structured advantages. The introduction of the new Civil and Commercial Code has bolstered the appeal of property donation by enhancing legal security for both donors and recipients, as well as third parties interested in acquiring property. Consequently, many individuals now opt to donate property to their kin while alive, retaining the right to use (usufruct) the property for their lifetime. This approach is seen as a proactive measure to settle affairs and prevent inheritance disputes, as per the provisions of the new Code.
Advantages include:
- Eliminating the need for inheritance proceedings through living donations, thus saving on legal and court fees as well as time.
- Donors are exempt from paying taxes on the donation.
- Recipients are free from national taxes on the received property.
- Donors may retain usufruct rights to the donated assets, ensuring continued benefits from the property or shares.
- Donations can be structured to minimize tax liabilities for heirs under progressive tax rates on income and personal assets.
Disadvantages encompass:
- Recipients in the Province of Buenos Aires might be liable for asset transfer taxes, with potential obligations in other areas if the property is located within Buenos Aires.
- Without usufruct rights, recipients bear full tax responsibilities on profits, personal assets, VAT, and gross income as applicable.
- Recipients allowing donors to inhabit the property without usufruct rights must declare notional rent, incurring tax liabilities.
- Ownership might disqualify recipients from subsidized mortgage loans aimed at first-time homeowners.
- Holding multiple properties could increase stamp duty costs upon transfer.
- Recipients who are small business taxpayers may face exclusion due to asset-related restrictions on income, activities, etc.