Donate goods of life to children or family members or what are called “living legacies” are an option that many consider interesting to ensure the well-being of their loved ones in the future. However, this process can be more complex and problematic than it seems at first glance. Even if the idea of distributing the heritage Before death can bring peace of mind, experts warn that the decision carries significant risks, both personally and economically.
More precisely, it is the economist Gonzalo Bernardos the one who assures that, “Before the donation, everything seems wonderful, but afterward, everything can change“. A message that serves as a warning to those who view living heirlooms as an easy solution. It should be remembered that one of the main considerations when planning a living donation is the Inheritance and gift tax (ISD). This tax, which varies depending on the autonomous community in which the transfer takes place, can represent a considerable burden for the heirs. But in addition, the fact of receiving a donation or an inheritance during one’s lifetime can complicate the personal relationships between the one who makes the gift and the one who receives the said gift. So, what may be well received a priori, in the long term can become an economic problem, as they say, but let’s not forget the personal level as well.
Important notice regarding inheritances or inter vivos donations
Often Inheritance and Gift Tax (ISD)i.e. the tax that is paid when inheritances or donations arise during life may be higher than inheritance tax in the event of death. And the fact is that factors such as the value of the assets and the relationship between the donor and the recipient are decisive in the calculation of the tax. However, despite these differences, tax planning is essential to avoid unpleasant surprises for heirs.
Besides tax issues, living donations can lead to family conflicts and personal complications. Gonzalo Bernardos points out that often what seemed like a generous gesture becomes a source of discord. Relationships between family members can deteriorate once assets are transferred. Heirs who have previously shown closeness and gratitude may distance themselves, leaving the donor in a vulnerable and emotionally affected position. Donations, although well-intentioned, can potentially upset the family balance.
The risk of early donations
Donating during one’s lifetime may seem like a smart move to distribute assets early, but in many cases this action hides more dangers than benefits.. One of the most common problems is the change in behavior of heirs after receiving the property. Bernardos warns that those who, before the donation, showed interest and attention towards the donor, may change their attitude after receiving their share. This change is not just a matter of affection, but can seriously affect the emotional well-being of the donor, who may feel neglected or even betrayed.
On the other hand, living donations don’t just affect personal relationships; They are also subject to legal complications. Unlike inheritances which are distributed after death and generally respect the will of the testator, Living donations may be subject to dispute or even revocation.. Donors could face claims or challenges if a family member feels unfairly treated or if irregularities are discovered in the process. For these reasons, it is crucial to have adequate legal advice before taking this step.
Tax Implications of Living Donations
The tax aspect is one of the most delicate when it comes to donations. Inter vivos gifts often carry a higher tax burden than inheritances, which can result in unexpected additional costs for heirs. THE the differences between autonomous communities can be significant, which adds a layer of complexity. Furthermore, the fact that the donated assets immediately increase the recipient’s wealth means that the recipient will have to face a series of payments that, in many cases, they are not prepared to assume.
Gonzalo Bernardos emphasizes that many donors make the mistake of not foreseeing the tax impact that a donation can have on their heirs. By not correctly calculating the taxes they must paythe heirs may find themselves in a complicated financial situation, unable to cover the expenses incurred by the donation. This fact can, paradoxically, generate more economic difficulties than benefits, affecting both the donor and the beneficiaries.
The Warning Against Donating All Your Possessions
The economist Gonzalo Bernardos is clear in its recommendation: nor it is advisable to donate the entire estate during one’s lifetime, especially if it involves high value goods. Making an outright gift can cause financial and emotional issues that are difficult for heirs to deal with. In many cases, beneficiaries are not prepared to manage large amounts of assets. nor do they fully understand the tax implications of receiving assets during their lifetime. In addition, the emotional distancing that can occur after the donation could generate a feeling of regret in the donor.
Bernardos points out that in many cases it is best to maintain control of the assets until the end, ensure that assets are distributed according to the wishes of the testator and not according to family dynamics which may change over time. Thus, it is possible to avoid conflicts, preserve family relationships and above all minimize fiscal and emotional burdens.
