The Basic Rule of Statutory Succession: Priority of Descendants

If the deceased did not leave a will, the rules of statutory succession apply. On this basis, the statutory heir is primarily the child of the deceased. If there are several children, the estate – or the part thereof falling to the children – is divided among them in equal shares per capita. What happens if a child died before the deceased and, as a result, was excluded from succession? The law is clear: in place of the excluded child – also in equal shares among themselves – his or her children, that is, the grandchildren of the deceased, inherit. It is important to know that death is not the only ground for exclusion; such a ground also exists, for example, if someone rejects the inheritance, becomes unworthy to inherit, or has validly renounced it.

Collation: A Means of Fair Distribution

A frequent question is what should be done if one of the children received a significant benefit – for example, an apartment – as a gift during the lifetime of the deceased. Through the institution of collation, the Civil Code seeks to ensure a fair distribution of assets among descendants. If several descendants inherit jointly, under the law each co-heir is obliged to add to the value of the estate the value of the gratuitous benefit (e.g. a gift) that the deceased granted to him or her during his or her lifetime. However, this is subject to the condition that the deceased expressly stipulated that it was to be added, or that it can clearly be inferred from the circumstances that the benefit was granted subject to the obligation to add it. An important exception is that a gratuitous benefit of customary value, as well as maintenance provided to a descendant in need of maintenance, does not have to be brought into collation even if the deceased expressly stipulated otherwise.

The Surviving Spouse’s Right of Usufruct and “Child’s Share”

One of the most significant innovations of the Civil Code currently in force was the transformation of the succession rights of the surviving spouse. In the case of succession alongside a descendant (that is, a child or grandchild), the spouse acquires two types of entitlement:

• The spouse is entitled to a right of usufruct for life over the dwelling jointly inhabited with the deceased, as well as over the furnishings and equipment belonging thereto. This right of usufruct is strongly protected by law: it may not be restricted, and its redemption may not be demanded against the spouse.
• From the remaining part of the estate (for example, a holiday home, bank account, car), the spouse inherits one child’s share as an heir acquiring ownership.

If the deceased has no child (or the child cannot inherit), the spouse nevertheless inherits the jointly inhabited dwelling and its furnishings, while one half of the remaining estate is inherited by the spouse and the other half by the parents of the deceased in equal shares. In the absence of descendants and parents, the spouse inherits alone. At the same time, the spouse is excluded from succession if, at the opening of the succession, the marital community of life between the spouses no longer existed and it was apparent that there was no prospect of its restoration.

The Compulsory Share: The Safety Net of the Closest Family

Through the institution of the compulsory share, the law prevents a person from completely depriving his or her closest relatives of property – whether by will or by giving away his or her property during his or her lifetime. The descendant, spouse and parent of the deceased are entitled to a compulsory share, provided that they would be statutory heirs, or would be such in the absence of a testamentary disposition.

Under the Civil Code currently in force, the amount of the compulsory share is precisely one third of the property that the entitled person would receive as a statutory heir. In determining the basis of the compulsory share, not only the value of the net estate must be taken into account, but also the value, at the time of granting, of gratuitous benefits granted by the deceased to anyone inter vivos. It is important to know that a claim for a compulsory share becomes time-barred after five years.

A person may validly be disinherited even from the compulsory share only in strict cases specified by law, for example, if he or she committed a criminal offence to the detriment of the deceased or failed to provide the deceased with assistance that could be expected from him or her.

Divorce can raise significant questions not only in personal life but also regarding the future of a business. This is particularly true when one spouse owns a company or when the spouses have built a business together during their marriage. In such cases, an important question arises: if the company is registered in only one spouse’s name, can the other spouse claim a share of its value?

The answer depends on several factors, including when and how the business interest was acquired, the period during which the spouses’ marital community of property existed, and whether joint marital assets were used to finance the business.

When transferring a high-value property, the key question is not only under which legal title the property can be acquired, but also what tax or duty consequences arise from the chosen legal arrangement. This is particularly relevant where the acquirer does not fall within the scope of persons exempt from inheritance or gift duty. This raises an important question: which legal arrangement – inheritance, gift, maintenance agreement, inheritance contract or trust – may result in the lowest duty burden?

Notice: This article does not constitute legal advisory services, and does not necessarily match the interpretation of the applicable laws by the authorities. This article is for general information only.

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One of the most common situations giving rise to the greatest number of conflicts during probate proceedings is when the deceased dies without making a testamentary disposition. In such cases, the fate of the assets and debts is determined by the statutory order of succession under the Hungarian Civil Code. Although the rules are clear, a significant proportion of clients are not aware of the more important changes introduced by the Civil Code currently in force, particularly with regard to the rights of the surviving spouse or the extent of the compulsory share.

Under the rules currently in force, the general rate of personal income tax (PIT) is 15 per cent of the tax base. In everyday language, many people lump the different concepts together and simply call every case in which no tax is deducted from their gross salary a “tax exemption.” From a legal-dogmatic perspective, however, classical tax exemption must be sharply distinguished from tax allowances. While tax-exempt revenues do not form part of the tax base in the first place, the tax system also recognises different rules that result in a reduction of the private individual’s tax: these are tax allowances reducing the consolidated tax base.

A particular characteristic of personal income tax is that these tax allowances and tax exemptions may be claimed only against income falling within the consolidated tax base and the tax thereon, and exclusively up to that amount.