How To Ensure Secure Property Transfer In Serbia

Part 1: How to ensure that your property gets into the right hands after death?

Agreement on assignment and distribution of property during lifetime

Death. A fact that, although inevitable, is difficult to accept objectively and without emotion. The local mentality and the customs that have existed among the people for years are based on the practice of superstition, which often results in avoiding the topic of death, and contributes to the dynamics of inheritance law. In law, death is a fact that represents a necessary and essential condition for inheritance, while inheritance from the living the is not possible.

In Serbian law, there are two ways of inheritance, based on the law and based on a will. Statistics say that only 5% of the population in the Republic of Serbia has a compiled will, presumably, for the reasons already mentioned. However, in many respects, the will can be substituted by the following institution of inheritance law. Namely, Serbian law recognize the contracts that are regulated by the Law on Inheritance (“Official Gazette of RS”, No. 46/95, 101/2003 – decision of the USRS and 6/2015, “Law“). In this way, the legislator enables, conditionally speaking, the inheritance from the living, as well. It is an agreement on assignment and distribution of property during lifetime and lifelong support contract. Other inheritance contracts – such as contracts that oblige someone to bequeath their property to someone or waive inheritance rights in advance, are prohibited under Serbian law. These two contracts, drawn up and executed in all respects in accordance with the Law, enable a person who disposes of his property in this way to obtain a certain benefit for it. This is one of the most important differences in relation to a will which is a statement of one person by which another person benefits, without giving any compensation for it, and for which special rules therefore apply.

In this text, more will be said about the agreement on assignment and distribution of property during lifetime.

The term

An agreement on assignment and distribution of property during lifetime and lifelong support contract (“Agreement“) is an agreement by which a testator can cede and divide his property to his descendants while he is alive (“Assignor“), which is why it is also called anticipated inheritance during the ancestor’s life. Due to its specifics, this Agreement is not regulated by the Law on Obligations, but by the Law on Inheritance. The essence of the Agreement is that the Assignor and the heirs can easily implement their agreement regarding the distribution of his property, and thus avoid lengthy inheritance proceedings in the future. In this way, a possible misunderstanding about the division of property after the death of the Assignor can be prevented.

Terms of validity of the Agreement

In order for this Agreement to produce legal effect, it is necessary that all the Assignor’s descendants, who will be invited to inherit him according to the Law, agree to the assignment and distribution. If a descendant has not given consent for the transfer and distribution of property, he can give it later. The Agreement is also valid if the descendant who did not give his consent, dies before the Assignor or renounces the inheritance or is unworthy of inheritance, and does not leave offspring. The descendant is unworthy to inherit if:

• intentionally killed the testator or attempted to do so;

• coerced, threatened or deceived the testator to make or revoke a will or any of its provisions, or prevented him from doing so;

• one who, in order to prevent the testator’s last will, destroyed or hid his will, or falsified it;

• one who has seriously omitted a legal obligation to support the testator, or has denied him the necessary assistance.

When one of the descendants who became the heir at the moment of the testator’s death did not agree with the Agreement, the parts of the property that were ceded to the other heirs are considered as a gift to him. The same legal effect occurs when, after concluding a contract with all descendants, a child is born to the Assignor or an heir appears who is declared deceased. In these cases, a conversion occurs – the conversion of a void Agreement into a valid gift contract, because it is considered that it was in accordance with the goal that the contractors had in mind when they concluded the Agreement, and that they would conclude that contract if they knew that the Agreement on assignment and distribution of property during lifetime was void.

This Agreement must be made before a notary public in the form of a notarized-solemnized document. This is due to the fact that in addition to the fact that it is most often real estate whose sale requires solemnization of the Agreement, and due to the fact that the notary must warn the contracting parties that the transferred property does not enter the testator’s estate and its compulsory heirs cannot be settled with it, about which he makes a note in the confirmation clause.

It is not necessary for the validity of the Agreement to cover the entire property of the Assignor. It is important that the subject of the Agreement is not some of the Assignor’s future property, i.e., a good which is not in his possession at the moment of concluding the Agreement, and which will be found in his estate at the moment of death.

Subject of the Agreement

The Agreement may cover only the Assignor’s property existing at the time of assignment and distribution, in whole or in part. As we have already mentioned, the provision of the Agreement which envisages the distribution of the goods that will be found in the Assignor’s estate does not produce legal effect.

Also, the Law explicitly prescribes that the assigned property does not enter into the testator’s estate. Therefore, the Assignor may conclude several agreements on the assignment and distribution of the remaining property or property acquired after the conclusion of one or more of these agreements. When the Assignor dies, his estate consists of goods that are not covered by the Agreement, as well as goods that he subsequently acquired.

Retention of various rights

Upon assignment and distribution, the Assignor may for himself or his spouse, or for both, or for anyone else retain the right of usufruct on all or some of the assigned goods, may contract a life annuity in things or money, life support or any other compensation.

When the enjoyment or life annuity is agreed for the Assignor and his spouse together, and one of them dies, the enjoyment or annuity belongs entirely to the other until his death unless otherwise agreed or if nothing else arises from the circumstances.

The right of the Assignor’s spouse

The Assignor may also include his spouse in the Agreement, if the spouse agrees, and then he has the same position as the Assignor’s descendants.

When the spouse is not covered by the assignment and distribution, his right to the forced share remains intact, and the parts of the Assignor’s property that were distributed to his descendants are considered as a gift.

In any case, the Agreement between the descendants remains in force.

Assignor’s debts and refuting of assignment

The descendants between whom the Assignor has divided his property are not liable for his debts, unless otherwise agreed. The Assignor’s creditors may refute the Agreement under the conditions for refuting free dispositions – with the Paulian lawsuit.

Also, the legal nature of the pledge, i.e., mortgage, is such that the descendants to whom the encumbered property was transferred will still be liable for these encumbrances, which were primarily established at the Assignor’s expense.

Guarantee obligation

The obligation of guarantee which arises after the division among the co-heirs, arises among the descendants and after the assignment and distribution, which means that the descendants in proportion to the obtained part of the property, are responsible to other descendants for legal and physical defects and for the existence and collectability of claims within 3 years of conclusion of the Agreement, i.e., from the due date of the obligation.

Revocation

The Assignor may request that the descendant return everything he received if the descendant showed gross ingratitude towards him.

The Assignor has the same right if the descendant does not give him or to another one the support determined by the Agreement, or does not settle the Assignor’s debts.

In other cases of non-execution of the obligation determined by the Agreement, the court, taking into account the importance of the obligation for the Assignor and other circumstances, decides whether the Assignor has the right to return the given goods, or the right to request forced execution of the obligation.

In what way can the Assignor request that his descendant return what he received?

Given the form of the Agreement, the Assignor and the descendant must make an agreement on the return and invalidity of part of the contract in the form of a notarized document. If the contracting parties do not agree, the Assignor must claim his rights in a lawsuit in civil proceedings.

The effects of returning of the received

The descendant who returned the received may, after the death of the Assignor, demand the forced share. When determining his forced share, he will consider parts of the property that the testator gave to other descendants and the spouse as a gift.