More people are planning asset transfers during their lifetime, weighing legal options like donations, life annuity contracts, and wills.
Donation During Lifetime
According to Art. 888 § 1 of the Civil Code, a donation is a contract where the donor obligates themselves to provide free consideration to the donee at the expense of their own property. Simply put, it involves transferring a property component to another person without expecting payment.
Important to note, a donation is a contract between a donor and a donee, who can be either a natural or legal person.
When Can a Donation Be Revoked?
A donation can be revoked in certain circumstances. If not yet executed, the donor can revoke it if their financial situation deteriorated after the contract, and executing the donation would threaten their maintenance or ability to meet alimentary obligations.
If the donation has been executed, the donor can revoke it if the donee has committed gross ingratitude, which should be objectively assessed as seriously harmful or contrary to legal and moral norms.
Life Annuity Contract
A life annuity contract involves transferring property ownership from the life tenant to a buyer, who in turn will support the tenant until death and organize a funeral according to local customs. This provides the asset transferor with a guarantee of care and support.
It’s a mutual, paid contract with specific obligations for both parties, detailed in the Civil Code. Unlike a donation, it cannot be terminated, but dissolution or conversion to a pension can be demanded under certain circumstances.
Will: Maintaining Control Until End of Life
A will is a legal act made to dispose of one’s property upon death. Unlike donations and life annuity contracts, it’s a unilateral declaration by the testator.
Wills can be ordinary (holographic or allographic) or notarial, with the latter being harder to challenge as it has official document status. Special forms include oral wills (before three witnesses), traveling wills (on Polish vessels), and military wills.
Comparing Options: Donation, Life Annuity or Will?
The best way to transfer assets depends on your goals and circumstances. Each option has specific benefits and drawbacks.
A donation provides immediate transfer without tax for family relationships, but is difficult to revoke. A will maintains the owner’s control until death but can be challenged, and heirs may face statutory legacy obligations. A life annuity contract can provide care during lifetime and avoid statutory legacy but has its own disadvantages.
Choosing the Right Option
If you want to transfer assets immediately, choose a donation. If you want to maintain control over assets until death, opt for a will. If you want to transfer assets during lifetime but ensure care, consider a life annuity contract.
