The reduction action

What is the reduction action in Italian succession?

Upon the death of a person, the estate of the decedent passes to the heirs. In the absence of a Will, it is the law that establishes who the heirs are and how they divide the inheritance. But even those who make Wills are not always free to decide who inherits their property after death.

In fact, there are some subjects who must legally receive a quota of the inheritance, even if this is against the Will of the deceased. These subjects are called, “legitimate heirs”, or “forced heirs”, precisely because they have the right to receive a share of the inheritance (articles 536 and following of the Italian civil code). They “forced heirs” are the spouse of the deceased (or registered partner), his/her children and, in the absence of children, his/her parents.

Reduction action

The inheritance reserved share for forced heirs varies according to number of the heirs and their kindship.

For example, case A: the decedent leaves the spouse (or registered partner) and one child, each of them has the right to at least one third of the inheritance (therefore in the Will the decedent can freely dispose of the remaining third part of the assets).

Case B: the decedent leaves the spouse (or registered partner) and two children, each one has the right to at least a quarter of the inheritance (therefore in the Will the decedent can freely dispose of the remaining quarter part of the assets).

The part of the inheritance that is not reserved for the legitimate heirs, and of which therefore, the testator can freely dispose, is called, “ available quota”.

It is clear, therefore, that those who want to make a Will, if they are married (or  in a registered partnership) or have children, are subject to a number of limitations, and can freely dispose of only a small part of their assets. The testamentary dispositions that go beyond the available quota can in fact be challenged by the legitimate heirs through the exercise of the reduction action, which returns the assets under consideration to being part of the inheritance (article 554 of the Italian civil code).

The protection of the rights of the legitimate heirs is complemented by the rule that prohibits the right-holders to renounce the reduction action before the death of the testator  (Article 557, second paragraph, of the Italian Civil Code), and the prohibition of inheritance agreements (Article 458 of the Civil Code).

To prevent anyone from circumventing the rights of legitimate heirs by gifting all or part of their assets while they are still alive, the law also provides for the possibility of exercising the reduction action against gifts, following the death of the donor (art. 555 of the Italian civil code).

In fact, to establish what assets belong to the legitimate heirs, the estate existing at the moment of death (relictum) is added to any gifts (donatum) made while the decedent was still alive. The forced quota is calculated on the total sum (relictum + donatum), and if the remaining assets do not suffice to satisfy the legal rights of the legitimate heirs, they may request the reduction of testamentary dispositions and gifts, starting with the most recent ones. As a result of the reduction action, the assets of the donations must be returned, in whole or in part, to the legitimate heirs, not only by the person who has received the gift, but also from any subsequent buyers of the assets in question.

This is why gifts can only be considered legally definitive ten years after the death of the donor, and from this derives a series of problems in the circulation of assets that have been gifted.

Recently, Italian legislation introduced a limit of twenty years from the time the gift was made, after which, the rights of buyers of the gifted assets would be definitively preserved, and any mortgages registered on the gifts would still be valid (decree law March 14, 2005, no. 35, converted with amendments by the law of May 14, 2005, no. 80). There is therefore, the possibility of challenging a gift, and the prohibition of the succession agreements remain, which prohibit the prior renunciation of a challenge. However, third parties who buy property or register a mortgage can sleep easy once twenty years have elapsed. After twenty years, in fact, legitimate heirs can only challenge those who originally received the gift for cash compensation.

A period of time untied from the death of the donor is certainly a step forward, but twenty years is a really long time. The twenty years, moreover, can be extended with an act of opposition to the gift by the spouse or immediate relatives (children or decedent’s parents). In this way, immediate relatives can reserve the right to act against all subsequent buyers of the gifted assets even if twenty years have elapsed. This act of opposition must be notified to the donor and transcribed in the land registry, and must be renewed every twenty years. Those entitled to do so, may renounce any opposition, but this waiver only prevents prolongation of the term beyond twenty years. The right to oppose can never be reduced to less than twenty years.