A Practical Guide to Italian Estate Planning

An Italian home, a family business, or a bank account held in Italy can bring Italian succession law into a family’s affairs, even where the family lives elsewhere. A considered guide to Italian estate planning starts with one practical point: arrangements that work well in another jurisdiction may not produce the intended result in Italy.

For international clients, the objective is rarely limited to writing a will. It is to establish which law will apply, protect the people who should be protected, reduce avoidable delay and tax exposure, and ensure that assets can be transferred without creating a dispute between heirs in more than one country.

Why Italian estate planning needs early attention

Italian succession law has its own structure, terminology and mandatory protections. This matters particularly where a person owns real estate in Italy, has Italian nationality, is habitually resident in Italy, or has close family members whose rights may be affected by a proposed distribution.

A common misconception is that a foreign will automatically governs every Italian asset in precisely the same way as it does at home. A foreign will may be valid and still require careful review before it can be used in Italy. Its language, execution formalities, treatment of matrimonial property and interaction with Italian forced heirship rules all need to be considered.

Planning is most valuable before a sale, purchase, move to Italy, marriage, divorce, serious illness or family disagreement. Once succession has opened, options are naturally narrower. A clear plan can also make life easier for relatives who may be dealing with Italian banks, notaries, property registers and tax requirements from abroad.

The foundations of a guide to Italian estate planning

Establish which succession law applies

Under the EU Succession Regulation, the law of the country where the deceased was habitually resident at death will generally govern the succession as a whole. Habitual residence is a factual assessment. It is not decided solely by passport, tax registration or the location of a single property. Family life, business activity, social ties and the permanence of a person’s connection with a country can all be relevant.

There is an important alternative. A person may generally choose the law of their nationality to govern their succession, provided that choice is made expressly in a will or other valid disposition of property upon death. For a British, American or other international client with assets in Italy, this choice can be highly significant.

The result depends on the facts. The Regulation may apply in relation to Italian assets even where the chosen national law is that of a non-EU state. However, questions of jurisdiction, recognition, administration and the law of the country of residence still need to be reviewed together. A choice of law is effective only when properly drafted and consistent with the client’s wider position.

Understand forced heirship rules

Italian law protects certain close relatives through the rules of legittima, often described as forced heirship. A spouse, civil partner in certain circumstances, children and, where there are no children, parents or other ascendants may be entitled to a reserved share of the estate.

This does not mean that a person cannot make a will or leave assets to friends, charities or more distant relatives. It does mean that only the disposable portion of an estate can be freely allocated if Italian succession law applies. The size of the reserved and disposable portions changes according to the surviving family members.

Gifts made during lifetime are also relevant. They may be taken into account when assessing whether reserved shares have been prejudiced. Where an heir has received less than their protected entitlement, they may be able to bring an action for reduction against testamentary gifts and, in some cases, lifetime transfers. A transfer intended to simplify succession can therefore create future litigation if it has not been structured with the whole family position in mind.

Put the right will in place

Italy recognises several forms of will, including a handwritten will, a notarial public will and a secret will. A handwritten will must be entirely written, dated and signed by the testator. It is inexpensive and can be valid, but it is more exposed to loss, ambiguity, allegations of incapacity and arguments over authenticity.

For clients with cross-border assets or a complex family structure, a public will prepared before an Italian notary can provide greater certainty regarding identity, capacity, formal execution and safe custody. A foreign will may also be appropriate, but it should be examined alongside Italian assets rather than treated as a separate document.

Two wills are sometimes used, one for Italian property and one for assets elsewhere. This can be sensible where each will be carefully limited so that one does not unintentionally revoke the other. It is not a drafting shortcut. Consistent terminology, revocation clauses and choice-of-law provisions are essential.

Property, business interests and family arrangements

Italian real estate deserves particular attention because title transfers must be recorded in the relevant registers. On death, heirs may need to complete a declaration of succession, deal with tax payments and arrange the formal transfer of ownership. If a property is jointly owned, the form of ownership and the deceased’s share must be verified rather than assumed.

Family businesses raise further questions. Passing shares to children who have different levels of involvement can produce a difficult balance between equal value and workable governance. Articles of association, shareholder agreements, voting rights and management succession may matter as much as the will itself. In suitable circumstances, Italian law provides tools such as the patto di famiglia, a family business agreement designed to facilitate the transfer of a business or shareholdings during the entrepreneur’s lifetime. Its use requires close attention to the rights and participation of protected heirs.

Matrimonial property regimes should also be reviewed. The assets that actually form part of a deceased person’s estate may differ depending on whether spouses are subject to community of property, separation of property or a foreign matrimonial regime. This is a frequent source of avoidable uncertainty for couples who have lived in more than one country.

Tax should inform the plan, not dictate it

Italian inheritance and gift tax can be material, although rates and exemptions depend on the relationship between the beneficiary and the deceased or donor. Transfers to spouses and direct descendants or ascendants are generally taxed at 4 per cent above an exemption of €1 million for each beneficiary. Transfers to siblings are generally taxed at 6 per cent above a lower exemption, while other relatives and unrelated beneficiaries may be subject to different treatment.

Real estate can also trigger mortgage and cadastral taxes. Preferential treatment may be available where the beneficiary meets the requirements for a principal home, but eligibility should never be presumed.

The Italian tax position depends in part on where the deceased was resident or domiciled for tax purposes and where the assets are located. A person who is not Italian tax resident may still create Italian inheritance tax exposure through Italian assets. Conversely, an Italian tax resident may bring a wider estate within scope. The interaction with inheritance, capital gains and wealth taxes in another country requires coordinated advice.

Trusts, life insurance policies and corporate structures are sometimes considered in international planning. They should not be adopted simply because they are familiar in another jurisdiction. Their Italian civil-law and tax treatment depends on their terms, timing, control arrangements and the rights of forced heirs. A structure that appears efficient on paper can be challenged if it is used to defeat mandatory succession rights.

A disciplined planning process

Good planning begins with a complete picture: assets and liabilities, nationalities, residences, family relationships, existing wills, gifts already made, company interests and intended beneficiaries. It should also identify practical documents, such as title deeds, share certificates, insurance policies and powers of attorney.

The next step is to determine the applicable succession and matrimonial property laws, then test the proposed distribution against forced heirship rules and tax consequences. Only after that should wills, family agreements, property arrangements or business governance documents be prepared or revised.

Plans should be reviewed when circumstances change. The purchase of an Italian property, a move abroad, remarriage, the birth of a child, a divorce or a significant lifetime gift can alter both the legal analysis and the sensible outcome. Keeping a will untouched for decades is often more risky than having no false confidence in it.

For a family with connections to Italy, estate planning is not merely a question of deciding who receives what. It is an opportunity to leave clear instructions, preserve family relationships and give those responsible for the estate a workable route through an unfamiliar legal system. Direct, coordinated advice from lawyers familiar with both Italian and international issues can turn that intention into arrangements that will stand up when they are needed.

For any further information or for a specific case, contact our law firm for a free initial consultation.

Avv. Massimiliano De Benetti email: m.debenetti@debenettilaw.com