12/7/2015

Mr. Zuckerberg and the "legittima" bug
Angelo Busani

Mr. Zuckerberg can donate, Signor Zuckerberg cannot. If the inventor of Facebook were a compatriot of ours and lived in Italy, our law, dictating the mandatory rule of the "legittima" portion in the event of succession, would prevent him from setting up the legal scheme with which he intends to give the community 99% of his shares, something like 45 billion dollars.

For the United States, these gestures are nothing new. Many other American billionaires have made similar choices and some (such as Allen, Bloomberg, Branson, Buffet, Gates, Hilton) are members of the super-exclusive club that only those who promise to donate the majority of their assets can join, as can be read on www.givingpledge.org.

Zuckerberg has also decided to donate a huge portion of his assets to charity, namely 99% of his shareholding in Facebook Inc. (but no one has to worry: with only 1% of his shares in Facebook and assuming unrealistically that he has no other resources, the Zuckerberg family will not live in hardship anyway, since that 1% is worth, more money less, about 450 million dollars).

In the U.S.A., therefore, it is a competition for those who donate more: it is the land where every dream can come true, and there it is normal to think that the children should not have to leave "already arrived" but should win success on an equal footing with their peers; and that those who have had good fortune owe it also to the community in which the conditions for accumulating it have been determined. For this reason it is normal that inheritance taxes are very high and that the system pushes those who want to make donations.

In Italy, on the other hand, the law states that if a natural person allocates all or a large part of his or her assets to a foundation and then dies leaving his or her spouse and children (or other descendants) they are entitled to a reduction in the contributions that the founder has made in favour of the foundation in order to achieve the "legittima". The same consequences occur if assets are donated through donations.

In fact, according to article 556 of the Civil Code, when the founder or the donor dies, the amount of the portion of his or her assets that he or she could freely dispose of (with free attributions) without infringing the "legittima" portions is determined:

- the value of all the assets that belonged to the deceased at the time of his death must be calculated;

- this value must be added to the value of the assets that the founder had freely disposed of during his life (e.g. donations or contributions to a foundation).

The result obtained is then calculated on the "available" portion (i.e. the part of the patrimony that the deceased could freely dispose of) and the "reserved" (or "legittima") portion: i.e. that part of the patrimony that the deceased would necessarily have had to allocate to his close relatives: a third to the spouse and a third to the only child (one third of "available" remaining) or, in the case of two children, a fourth to each of them and a fourth to the widowed spouse (one quarter of "available" remaining).

For example, if the deceased dies being the owner of a fortune worth 10, has donated a value of 150 during his life and his wife and two children are left as survivors, the share available is 40 (1/4 of 10 + 150) and also worth 40 is the portion reserved for the surviving spouse and each of the two children. Therefore, if those 150 had contributed to a foundation, the spouse and the two children could turn to the foundation, on the death of the founder, to obtain the restitution of 110 (leaving only 40 to the foundation).

It should also be pointed out that in our legal system there is a ban on so-called "pacts of inheritance": for example, the agreement between the billionaire and his future heirs would be null and void if, for example, the latter agreed to the philanthropic operations of the benefactor in question. In essence, these future heirs would not lose, despite having signed that agreement, the right to challenge the donations in order to get their legitimate share.

How can you emulate Mr. Facebook if you are a natural person subject to Italian law (Italian law applies to people domiciled in Italy, regardless of their nationality, Italian or foreign)? Apart from invoking a change in the relevant legislation, the intent is quite impractical (given the imperative nature of the legislation described), unless you take your cue from what Zuckerberg himself has put in place, i.e. by not disposing his assets in favour of a charity (i.e. the equivalent of one of our foundations, for example, Bill Gates did by setting up the Bill & Melinda Gates Foundation) but in favour of an Llc (limited liability company), i.e. an "ordinary" commercial company (which, moreover, in the United States may also be non-profit-making), which, if we wanted to translate the phenomenon into concepts of Italian law, could be represented as an Srl whose income is, however, directly attributed to the shareholders (as in partnerships under Italian law).

Allocating money in Italy to a company costs nothing (only a fixed registration tax of 250 euros is paid) and the operations that this company, on the strength of the patrimonial contribution received, carries out philanthropic, charitable, cultural, etc., should not be disputed by the heirs of the person who conferred the money, once the latter has died. However, this is an extreme scenario, because in our legal system the activity of the companies (and their directors) must be preordained to carry out an economic activity aimed at the production and distribution of profits. This clearly conflicts quite inevitably with the purpose of charity and non-repayable grants. However, it is never known that the scenario will change with the introduction of the so-called "società-benefit" in our system, which will be able to combine lucrative activity with non-profit initiatives.

The situation would certainly be much easier if a change in legislation were possible. In fact, it would not be difficult to imagine a regulatory scenario which, without cancelling the "lgittima", would reduce it, however, more or less drastically, if the payments made by the deceased during his lifetime were particularly qualified, for example, because they were intended to finance certain initiatives or the activities of certain non-profit organisations. The current law on gift tax is already organised in this sense: it provides that, for certain donations, characterised by certain altruistic purposes, there is the benefit of total exemption from the application of the tax in question.

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