This article explains the concepts of reserved portion and collation under the Maltese succession law.
What is the Reserved Portion?
Maltese law of succession requires that the children and the spouse of any person are entitled to a part of that person's estate on his demise, and therefore cannot be left out of the deceased's will unless disinherited on (very restricted) grounds stipulated in the law.
This ensures that those closest to the deceased, whether he/she dies tesate (having drawn up a will) or intestate (not having drawn up a will) receive a portion of the deceased's estate on his demise. This is known as the "reserved portion" (previously known as the "legitim" – "il-legittima" in Maltese). The rest of the deceased's estate is the "disposable portion" and consists of the totality of the deceased's estate after the deduction of any debts owed by the estate and the funeral expenses. It also includes nearly all the donations made by the deceased, in favour of any person whosoever during his /her lifetime, in such a way that those entitled to the reserved portion are not prejudiced by a donation.
When referring to the children of a deceased person, the law does not distinguish between children born in or out of wedlock (as it did in the past) and as such, they are all equally entitled to the estate.
Article 616 of the Civil Code provides us with the fraction of the estate which must be part of the reserved portion to which the children would be entitled:
- One-third of the estate if the deceased did not have more than four children, and
- One-half if the deceased had more than five children.
- One-third of the estate if the deceased had one child.
The surviving spouse also has the right to the reserved portion, as stipulated in Article 631 and 632 of the Civil Code, as follows:
- One-fourth in full ownership of the estate if the deceased spouse is survived by children and/or other descendants; or
- One-third in full ownership if the deceased spouse does not leave behind any children and/or other descendants.
When drawing up a will, the testator cannot exceed the disposable portion in his testamentary dispositions; however, it is still possible for the testator to dispose of parts of the estate during his lifetime, even in excess of the disposable portion. This would include situations where a descendant, who is already entitled to the reserved portion, has already received property by donation from the deceased, while a sibling/other descendant has not. This is where the rule of collation would come in. Collation corrects any inequality between the children by taking into consideration the value of the property donated during the deceased's lifetime.
Article 913 of the Civil Code states that children shall impute, in the interests of the other children, being co-heirs, the value of everything that they may have received from the deceased by donation, directly or indirectly, unless the donor would have otherwise directed. The law goes on to say that it shall not be lawful for the child, notwithstanding an express exemption from the obligation of collation, to retain the donation except to the extent of the disposable portion, and any excess shall be subject to collation.
The process of collation requires three criteria to be met:
- There must be a situation of inheritance between deceased and children, one or more of whom have received property by donation from the deceased during his lifetime,
- There must a situation of at least another descendant who is also co-heir,
- There was no exemption from collation by the deceased.
It is also worth noting that the value of the property donated is to be calculated at the time of the opening of the succession and not at the time of the donation. The child who benefitted from the donation would be allowed to deduct the expenses which were used to improve the property however, in instances of donation of immovable property a number of years before the testator's death, it is common for the value of the property to have shot up considerably between the date of the donation and the date of opening of the succession.
Exemption from collation
Article 914 of the Civil Code states that exemption from collation may be granted either by the deed of donation or by a different deed which has all the formalities needed for the validity of donations or wills. This is important as while donations of immovable property must take place through a public deed, this is not true of all donations. It should be noted, however, that Article 915 goes to say that notwithstanding an express exemption from collation, it is illegal for the descendant to retain a donation that exceeds the value of the disposable portion, and any excess would still be subject to collation.
The law gives a list of things that are not subject to collation. These are:
- All things left by will (unless there is a stipulation to the contrary)
- Expenses of maintenance, education, and instruction, the ordinary expenses on the occasion of weddings, and customary presents.
- Any profits which may have been derived from agreements entered into with the deceased shall likewise not be subject to collation, provided such agreements did not, at the time they were entered into, confer any indirect advantage.
- Any special partnership entered into, without any fraud, between the deceased and one of his heirs.
- Donations made to the descendant of the heir.
- Things consumable by use.
The reserved portion and collation serve to create a system where wealth can be passed down the generations in an equitable manner, where no descendant benefits disproportionately more than another from the deceased's estate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.