Revocation of a gift
It is becoming increasingly common for a testator to make gifts of his or her assets at an early stage. This is one of the best options for reducing compulsory portion claims and retaining the freedom to dispose of his or her assets. However, the testator does not always remain satisfied with his decision to make a gift. In some cases, the testator wishes to have the object of the gift returned or is dissatisfied with the person receiving the gift and wishes to rescind the gift for these reasons.
For what reasons can I revoke my gift?
With regard to the grounds for revoking a gift, a distinction must be made between contractual and statutory grounds for revocation. First of all, it is necessary to check whether the respective gift contract concluded provides for any revocation clauses.
Examples of a right of revocation in the gift agreement are:
- Divorce of the donee's marriage without a corresponding prenuptial agreement ensuring that the donated assets are taken into account in the equalization of gains.
- The donee predeceases the donor and is not inherited by descendants.
- Without the consent of the donor, the donated property is sold or mortgaged.
- Personal insolvency or foreclosure on the donated property.
- Conduct of the donee that would justify deprivation of the compulsory portion.
- The donor can no longer finance his or her reasonable maintenance in the accustomed standard of living.
1. Gross ingratitude of the donee
Gross ingratitude is probably one of the most important statutory grounds for revocation. This ground is set out in Section 530 (1) of the German Civil Code (BGB). In court disputes, gross ingratitude is assumed if the donee "reveals an ungrateful disposition by a serious misconduct directed against the donor." This misconduct must be intentional and morally reproachable.
Gross ingratitude is presumed in the case of, among other things:
- Threat to life
- Serious physical abuse
- Groundless criminal charges
- Groundless petitions for incapacitation or guardianship
- Serious insults
- Adulterous behavior
- Establishment of a competing business
2. Impoverishment of the donor
Pursuant to Section 528(1), the gift may be reclaimed to the extent that, after the execution of the gift, the donor is unable to provide for his reasonable maintenance and to fulfill the duty of maintenance legally owed to his relatives, spouse, common-law partner, or former spouse or common-law partner, he may demand that the donee return the gift in accordance with the rules governing the return of unjust enrichment.
The restitution of the gift can be averted by providing the donor with the necessary funds to remedy his or her financial plight. Increasingly, social welfare agencies are also resorting to this right of recovery. Due to the subordination of social assistance, social law allows for a corresponding transfer of the claim.
According to Section 529 (1) of the German Civil Code (BGB), the right of recovery due to impoverishment of the donor is excluded if the donor has caused his indigence intentionally or through gross negligence or if ten years have passed since the donated object was provided at the time of the occurrence of his indigence.
3. Cessation of the basis of the transaction
Insofar as none of the aforementioned statutory or contractual rights of recovery should be relevant, the principle of the cessation of the basis of the transaction is of great importance. This concept is part of the principle of good faith and finds its legal framework in Section 313 BGB.
With regard to a gift, the BGH defines the business reason as the common ideas of the donor and the donee at the time of the conclusion of the contract, which, however, did not become part of the contract.
Recovery on such grounds has so far been assumed in case law in particular in the case of gifts between spouses, fiancés and cohabitants.
Recovery on the grounds of misappropriation is also possible. According to the principles of the law of enrichment, a person who has received a gift from another is obliged to return it if the success intended by the gift does not occur. A prerequisite for this is the existence of a special purpose agreement.
In practice, it is not uncommon for parents to make gifts not only to their children but also to their spouses. Should a separation or divorce occur, the parents-in-law often wish to reverse the gift. In its ruling of February 3, 2010, the Federal Court of Justice (BGH) opened up the possibility of revoking the gift to the child-in-law if, when the gift was made, it was expressly taken into account that the marriage could fail in the future and the child-in-law was informed of the in-laws' intention (Akz.: XII ZR 189/06). The BGH stated in its judgment that the business basis of such a gift is regularly the marital cohabitation between child and child-in-law and therefore the own child comes due to this into the continuing benefit of the gift.
4. Reversal despite Berlin will
Specifically in inheritance law, there is still a possibility of reversal if a gift was made despite the existence of a Berlin will.
Pursuant to § 2287 BGB analogously, the contractual heir can demand the return of the gift if the testator makes a gift with the intention of affecting the contractual heir. In the case of a Berlin will, this applies to the appointed final heir or the last child to inherit.
When is the gift excluded?
Even in the case of gross ingratitude, the revocation of the gift is excluded pursuant to Section 532 S. 1 BGB if the donor has forgiven the donee for his misconduct. For the assumption of forgiveness, the donor must show behavior from which it can be concluded that he no longer perceives the behavior of the donee as a slight.
In addition, revocation is precluded if one year has elapsed since the donor became aware of the reason for the revocation. Revocation is also not possible if the donee is deceased. Thus, the claim for return cannot be asserted against the heirs either.
In the case of gifts of obligation or decency, revocation pursuant to Section 534 of the German Civil Code (BGB) is not an option.
When does the claim for restitution become time-barred?
As already mentioned above, the claim for restitution of the gifted object is excluded pursuant to Section 529 (1) BGB if, at the time of the occurrence of the donor's indigence, ten years have elapsed since the performance of the gifted object.
The 10-year period starts from the date of execution of the gift. With regard to a gift of real estate, the Federal Court of Justice stated in its judgment of July 19, 2011 (Case No.: X ZR 140/10) that this is already the case if the donee has filed an application for registration of the change of title with the Land Registry, based on a proper gift agreement and conveyance.
The usual limitation period of three years pursuant to Section 195 of the German Civil Code applies to the limitation of the claim for repayment. The beginning of the limitation period is the end of the year in which the claim arose and the donor learns of the circumstances that entitle him to revoke. This shall also apply if the donor should have become aware of these circumstances but failed to do so due to gross negligence.