Inheritance tax: what it is, how it works and when it is compulsory

The principle of inheritance collation is the mechanism whereby, at the time of succession, certain gifts made by the deceased during their lifetime to their children, their descendants and their spouse are taken into account in the division of the estate. The aim is to take into account what certain co-heirs have already received prior to the opening of the succession, so as to correctly determine the estate to be divided.

This does not necessarily mean that the recipient of a donation must physically return the asset. Depending on what has been donated and the provisions of the Civil Code, the transfer may take place in kind, by set-off or, in the case of sums of money, in accordance with specific rules.

The principle of equalisation is governed by Articles 737 et seq. of the Civil Code and applies to certain persons who are entitled to a share of the estate, subject to the exceptions provided for by law and any waiver of equalisation stipulated by the deceased.

What is the collation of an estate and what is its purpose?

The basis of collation lies in the need to take account of the gifts that the deceased made during their lifetime to certain persons who are entitled to a share of their estate.

In practical terms, a gift received by a child may be regarded, in relations with the other co-heirs, as an advance on the share of the estate to which they would subsequently have been entitled. At the time of the division of the estate, what has been received may therefore affect the determination of the shares and the allocation of the remaining assets.

Consider, for example, the case of a parent with two children who, during their lifetime, made a gift to only one of them. If that gift is subject to collation, the division takes into account not only what remained in the deceased’s estate, but also what one of the children had already received.

A collation therefore does not entail the revocation of the gift and does not necessarily result in the physical return of the asset to the estate. Rather, it serves to take account, at the time of the division of the estate, of the dispositions of assets made by the deceased during their lifetime.

This institution also presupposes the existence of a community of heirs and an estate to be divided. The Court of Cassation has clarified that, if the estate has been entirely depleted through gifts or bequests and there is no remaining estate to be divided, there is no basis for collation, without prejudice to any protection afforded by other means, such as an action for reduction.

Who is required to provide a collation?

Article 737 of the Civil Code sets out the persons required to make a contribution to the estate: children, their descendants and the spouse who are entitled to a share of the estate must contribute the value of anything they received from the deceased by way of a gift, whether directly or indirectly, unless exempted.

Not all heirs are therefore subject to this obligation. The person who has received the gift must belong to one of the categories specified by law and be an heir to the estate.

The following are interested:

• the children of the deceased;
• their descendants, where they are entitled to a share of the estate;
• the deceased’s spouse.

A brother, a sister or a person outside the family who has received a gift is not, by that fact alone, subject to the equalisation provided for in Article 737.

These rules may apply both to intestate succession and, where the conditions are met, to testamentary succession. The existence of a will therefore does not automatically preclude collation.

The acceptance of an inheritance is also significant. Anyone who renounces an inheritance does not take part in the division as a co-heir and is therefore not obliged to contribute to the estate in that capacity.

The donation received may, however, continue to have implications in other aspects of succession, particularly in determining the disposable portion and in safeguarding the rights of any statutory heirs. The research material also expressly highlights this distinction.

Which gifts are subject to equalisation?

The scope of the collation is not limited to gifts formalised by a specific deed of gift. Article 737 refers, in fact, to what the co-heir has received from the deceased by way of a gift, whether directly or indirectly.

Both a direct donation and certain gifts made through different transactions may therefore be of significance.

Donation of a property

One of the most common scenarios involves a property donated to a child whilst the donor is still alive. In the case of property, Article 746 of the Civil Code provides that collation is to be effected either by returning the property in kind or by attributing its value to one’s share, at the discretion of the donor. However, this choice is not always available: if the property has been sold or mortgaged, collation is effected solely by attribution.

When property is allocated by attribution, its value at the time the succession commences is what counts. The Court of Cassation reaffirmed in 2024 that the value attained after the time of division must not be taken into account.

Donations of money

Sums of money donated by the deceased during their lifetime may also be subject to collation.

First of all, however, it is necessary to verify that the money received was in fact a donation. A bank transfer or money transfer from a parent to a child may, in fact, serve different purposes: it could, for example, be a loan, a repayment or the payment of a normal maintenance expense. For this reason, not every sum received should automatically be considered a gift. The research literature also emphasises this distinction.

Where, however, the money in question has actually been donated and is subject to set-off, the Civil Code lays down specific rules. Put simply, anyone who has already received a sum from the deceased must take this into account when the estate is divided and, as a result, may receive a smaller share of the money in the estate.

If the funds available in the estate are insufficient, the additional provisions set out in Article 751 of the Civil Code shall apply.

This mechanism differs from the allocation-based collation applied to other assets: this is precisely why it is useful to deal with the donation of sums of money separately.

Indirect donations

An indirect gift – that is, a gift made through a transaction other than a standard gift agreement – may also be included in the estate.

A common example is that of a parent who covers the cost of purchasing a property that is registered in their child’s name, or who pays off their child’s debt or mortgage. Even in such cases, however, it is necessary to ascertain the true nature of the transaction and distinguish between a gift and a loan, a repayment or maintenance payments.

The available documentation may therefore prove crucial to understanding what actually happened.

For further information on wealth planning and succession, please refer to the section of our firm’s website dedicated to Wills, Inheritance and Trusts, which also covers gifts, declarations of succession and the division of assets amongst heirs.

Which expenses are not subject to collation?

The equalisation of estates does not apply solely to assets or sums of money transferred by way of an actual gift. In some cases, expenses incurred by the deceased for the benefit of a child or another person subject to equalisation may also be relevant, where, by their nature and amount, they constitute an actual financial benefit.

This does not mean, however, that all expenses incurred by a parent on behalf of a child must be taken into account at the time of inheritance. The Civil Code expressly excludes from the calculation of the estate’s value the normal costs of maintenance and education, those incurred due to illness, and ordinary expenses for clothing and weddings.

For certain expenses, such as those incurred for a trousseau or for artistic or vocational training, the assessment may, however, depend on their amount: they are considered significant when they considerably exceed the usual amount, taking into account the financial circumstances of the deceased.

The criterion to be considered is therefore the specific nature of the payment. Paying for a child’s normal living, education or healthcare expenses is different from making a particularly large payment that provides the child with an additional financial benefit. For this reason, particularly in less clear-cut cases, it is necessary to assess the amount, purpose and circumstances of the expenditure. The research material also emphasises that the distinction can become less clear-cut when financial support significantly exceeds normal maintenance.

The Civil Code also provides for a specific exemption for spouses in respect of gifts of modest value, the modest nature of which must also be assessed in relation to the donor’s financial circumstances.

How set-off takes place: in kind, by set-off or in cash

The term ‘conferire’ does not necessarily mean physically handing over to the other heirs what has been received.

The procedure varies depending on the nature of the asset.

Payment in kind

Under the principle of collation in kind, the asset previously gifted is reintegrated into the estate and once again forms part of the estate for the purposes of its division.

In the case of immovable property, the Civil Code grants the co-heir who is the donee the option to choose a contribution in kind in the cases provided for by law.

Collation by charge

In the case of collation by imputation, however, the asset remains with the donee, but its value is included in the share of the estate to which they are entitled.

Put simply, anyone who has already received a share of the estate through a gift will receive a smaller share of the remaining assets in the inheritance.

In the case of movable property, the collation is carried out by allocation, and the value specified in the Civil Code with reference to the opening of the succession is taken into account. The Court of Cassation has also referred to this principle.

As we have seen, sums of money, on the other hand, are subject to the specific provisions of Article 751.

A practical example of the collation of an estate

A simplified example makes it easier to understand how collation by imputation works.

Consider an estate with two children and no other heirs. The estate comprises assets with a total value of 100,000 euros, whilst Child A had already received, during the testator’s lifetime, an asset whose value for the purposes of collation is 40,000 euros.

As Son A has already received 40,000 euros, he is allocated 30,000 euros from the remaining 100,000 euros. Son B, on the other hand, is allocated 70,000 euros.

Taking into account what they have received previously, each child thus receives a total of 70,000 euros.

This example has been deliberately simplified. In a real-life inheritance case, factors such as the presence of a spouse or other heirs, any testamentary dispositions, debts, other gifts, the value of individual assets and any exemption from collation may all have an impact.

Exemption from collation: what it is and how it may be granted

When making a donation, the donor may stipulate that the donated sum should not be taken into account in any future equalisation of shares amongst the heirs. This choice is known as a waiver of equalisation.

The exemption may be provided for in the deed by which the gift is made. For example, a parent who gifts a property to a child may state in the same deed that the gift is exempt from collation. Since, subject to the exceptions provided for by law, a gift must be formalised by a public deed, this intention may be expressed directly in the deed drawn up by the notary.

The decision may also be expressed at a later date, for example through a provision in a will. In this case, the parent may stipulate in the will that a gift made previously is exempt from collation. The will may be a holographic will – that is, written entirely by hand, dated and signed by the testator – or it may be drawn up by a notary in accordance with the procedures laid down by law.

It is therefore incorrect to assume that the waiver is granted by the other heirs following the donor’s death. It is the donor who expresses this intention, whilst the effects of the waiver come into play when the succession commences and it becomes necessary to determine how the gifts made during the donor’s lifetime affect the division of the estate amongst the co-heirs.

However, a testamentary disposition does not allow the testator to freely dispose of their entire estate in favour of a single heir. It takes effect only within the limits of the disposable portion, that is, the part of the estate which may be disposed of without compromising the share reserved by law for compulsory heirs, such as the spouse and children.

For example, if a parent donates a property to one of their children and exempts that child from the obligation to contribute to the estate, upon the parent’s death that child will be able to benefit from the exemption within the limits permitted by the disposable portion. If, however, the donation affects the rights that the law reserves for the other statutory heirs, the existence of the exemption does not remove the safeguards provided for their benefit.

Exemption from collation does not, in fact, mean that the gift becomes irrelevant to the succession. Even a gift that has been exempted must be taken into account when determining whether the reserved shares of the compulsory heirs have been respected. To this end, a so-called ‘fictitious consolidation’ is carried out: a calculation that reconstructs the deceased’s estate, taking into account any gifts made during their lifetime.

Collation, fictitious consolidation, reduction and division: the differences

Collation is often compared to other institutions of inheritance law, but their respective purposes are different.

For the purposes of calculating the statutory share, the notional consolidation takes into account gifts made by the deceased, including those to persons other than those obliged to contribute to the estate. It does not in itself entail the return of the assets: it is a calculation.

The action for reduction, on the other hand, is intended to protect a statutory heir whose reserved share has been infringed. Collation and reduction may relate to the same gift, but they remain separate legal concepts. The Court of Cassation has expressly reaffirmed the difference in the legal basis and purpose between the division of an estate and an action for reduction.

The collation of the estate and the role of the notary

Where the estate includes gifts made by the deceased during their lifetime, it may be necessary to reconstruct the full financial picture before the estate is divided.

It is not enough simply to know that a child or spouse has received an asset or a sum of money. It is necessary to ascertain the nature of the transfer, establish whether it falls within the scope of the collation, identify any exemption, and determine what value should be taken into account.

In practice, the following may be useful:

• deeds of gift;
• any will;
• the declaration of succession;
• documentation relating to properties and other assets;
• bank statements and other banking documents, when it is necessary to trace money transfers;
• any valuations of the assets;
• the documentation showing any exemption.

Research documents also indicate that deeds of gift, wills, inventories of assets and valuations are among the key elements required to reconstruct the situation accurately.

The notary may examine the documentation and verify the relevant details concerning the succession and any consensual division of the estate. Where there is a dispute requiring a court ruling, the matter is instead dealt with in accordance with the procedures laid down for judicial division and any other relevant proceedings. The material analysed correctly distinguishes between the notary’s role in consensual division and that in judicial division in the event of disagreement.

For further information on the documentation normally required for inheritance proceedings, please refer to the firm’s ‘Family Services’ section, which includes a specific section on inheritance.

Is there a limitation period for the right to claim a share of an estate?

The right to collation is closely linked to the right to request the division of the estate.

According to the approach also adopted in the studies of the National Council of Notaries, collation is subject to the same lack of limitation period as that applicable to the action for partition between co-heirs. In other words, there is no separate ordinary limitation period for collation running from the opening of the succession. (National Council of Notaries, study no. 77-2023/C, G. Amadio, ‘Structure and effects of collation in the theory of the division of an estate’).

However, this principle does not mean that any claim relating to an old donation can be brought without any time limit.

It may, in fact, be necessary to bring other actions, each subject to its own rules. For example, where, in order to obtain collation, it is first necessary to prove that a transfer formally made for consideration actually concealed a gift, the action aimed at establishing the simulation is in itself not subject to any limitation period, because it seeks to establish the nullity of the simulated transaction; by contrast, the rights arising from the concealed transaction may be subject to a limitation period (Civil Court of Cassation, Section II, 18 February 2025, No. 4146).

For this reason, particularly in the case of donations made some time ago or disputed transactions, it is necessary to identify precisely which right or remedy should actually be exercised.

Notarial assistance with probate and the division of an estate in Padua

Where the estate includes gifts made by the deceased during their lifetime, it may be necessary to reconstruct the distribution of assets, verify whether there is any exemption from collation, and assess the effects of this on the subsequent division of the estate amongst the co-heirs.

The Doria Saglietti Scerbo Notarial Practice provides assistance with inheritance matters at its offices:

• Padua Head Office: Corso del Popolo, 8/C – 35131 Padua | Tel. 049 655 080
• Vigonza Office: Via Bachelet, 5 – 35010 Vigonza (PD) | Tel. 049 628 807
• Grantorto Office: Via Umberto I, 55/2 – 35010 Grantorto (PD) | Tel. 049 655 080

You can email us at info@studionotariledbs.it or use the ‘Contact and Quotes’ page to request information or book an appointment. The contact details are the same as those currently published on the firm’s ‘Contact’ page.

FAQs on the division of an estate