Inheritance: Is a home loan subject to reporting?

The court ruled that if a parent lends a home to one of their children, this act does not automatically constitute a gift. Therefore, this benefit does not need to be taken into account when dividing the estate among the other heirs.
 

In one case, siblings accused one of their own of having lived in their father’s apartment for two years. According to them, he had thereby received a gift worth nearly 183,000 euros. They demanded that this amount be included in the estate’s assets to be divided.
In his defense, the recipient of the father’s apartment argued “that only a gift—which implies a depletion of the grantor’s assets with the intent to benefit the heir—is subject to recapture by the estate,” but that in his case, such intent had not been demonstrated.
 

Despite this argument, the Court of Appeals held that the use of the apartment in exchange for rent below market rate constituted an indirect gift. In the judges’ view, renting out the property at market rate would have allowed him to accumulate greater wealth; by refraining from renting it out, the father had “acted with the intention of benefiting his son, thereby demonstrating a generous intent.”
 

No gift without a generous intent
Upon reviewing the case, the Court of Cassation did not follow the reasoning of the appellate court. Unlike the lower courts, it held that while the use of the home to house his son did indeed impoverish the father, by inferring “the existence of a gratuitous intent on the part of the grantors solely from their impoverishment for the benefit of one of their children, the Court of Appeal failed to provide a legal basis for its decision.” 
 

The Court of Cassation therefore remanded the case to a different court of appeals so that the deceased's intention to bequeath the gift to the beneficiary could be proven.
 

If this indirect gift is proven, it will be taken into account in calculating the share due to the various heirs, and the beneficiary will be required to pay inheritance tax, plus late-payment interest and a 40% surcharge for willful failure to comply with reporting requirements.