Gifts have been largely used as a wealth and succession planning mechanism, especially after the arrival of the pandemic, which forced many individuals and families to think about their asset succession.
Even though, in many cases, gifts represent a beneficial and efficient alternative for a succession planning, this is not an absolute rule, once there are legal limitations to its enforceability.
Article 549 of the Brazilian Civil Code (“CC”) establishes that gifts in excess of the estate disposable portion (50% of the estate) shall be considered null and void (“Doação Inoficiosa”).
In case of uncertainty regarding the incurrence in “Doação Inoficiosa”, a jeopardized heir may protect his/her rights upon: (i) filing of a lawsuit aiming to reduce “Doação Inoficiosa”; and (ii) requesting the rebalance of assets (“Colação”).
Upon filing of the proper lawsuit (“Ação de Redução de Doação Inoficiosa”), the jeopardized heir aims to proportionally reduce the gifts in relation to the Doação Inoficiosa. The portion of the gift made in compliance with the law, not exceeding, thus, the disposable portion, shall remain valid and in full force.
Such lawsuit may be filed at any time, even if the donor is still alive, with a statute of limitation of 10 years as of the date of the gift (Article 205 of the CC).
Upon the death of the donor, any and all heirs that may have received gifts in advance to their forced heirship quota (“Beneficiary Heir”) are required to report which assets he/they has/have been granted with and the corresponding values, with the purpose of equalizing the estate amongst all heirs, according to Article 2002 of the CC.
If the Beneficiary Heir does not comply with such reporting obligation, a jeopardized heir is entitled to request the “Colação” in the corresponding probate proceeding. If the Beneficiary Heir still fails to disclose the information regarding the gifts received, the jeopardized heir is entitled to file a lawsuit (“Ação de Sonegados”) to compel the Beneficiary Heir to disclose such information, which may result on loss of the rights and title granted to the Beneficiary Heir in regard to the concealed or not informed assets (Articles 1.992 to 1.996 of the CC).
In both cases, the plaintiff has the burden of proof that his/her forced heirship quota has not been respected and thus, request, amongst other evidences, the disclosure of bank and financial records of the donor(s) and/or Beneficiary Heir(s).
This matter has been arising special attention also due to an ongoing legal dispute, by means of which two heirs of Mr. Attilio Fontana allege to have been neglected in regard to other six heirs, who benefited from “Doações Inoficiosas”. Mr. Fontana was the founder of Sadia, a Brazilian food processing group, currently known as BRF, and the case is now under discussion on the Superior Court of Justice.