Simulation by the deceased, known in practice as concealing assets from the estate, is the deceased’s presentation, contrary to the truth, of a gratuitous benefit conferred on one of the heirs or on a third party in the appearance of a sale or a contract of maintenance until death, with the aim of depriving certain heirs of their inheritance rights.
In this scenario the deceased narrows the estate by making it appear that an asset he or she in fact wished to give away was transferred in return for a price or as the consideration for an obligation of care. The true objective of the arrangement is to prevent heirs entitled to a reserved portion from having recourse to abatement in order to reach the shares that belong to them by law. In such a picture, all heirs whose inheritance rights have been impaired may seek a declaration that the simulated disposition is invalid and the annulment of the transactions founded on it.
In short, simulation by the deceased describes the phenomenon of concealing assets from the heirs by deceiving them. Although the deceased’s true aim is to give the immovable property to one of the heirs or to a third party, the intention to make a gift is concealed under the cloak of a sale or a contract of maintenance until death, so as to prevent the heirs from later claiming their shares in that property and to take the asset out of the estate.
The Definition of Simulation by the Deceased
Simulation by the deceased is the presentation, contrary to the truth, in the form of a sale or a contract of maintenance until death, of gratuitous benefits conferred by the deceased on one of the heirs or on a third party with the aim of depriving the other heirs of their inheritance rights.
The Elements and the Conditions Required
This institution became settled in our legal system through the Decision on the Unification of Case Law of the Court of Cassation of 1 April 1974, No. 1/2. That decision made it compulsory for a number of conditions to be present together before a transaction may be regarded as simulation by the deceased, and established the following principles.
The Ostensible Transaction
Simulated transactions are contracts which set out to deceive the heirs and deprive them of their inheritance rights, which do not reflect the parties’ real intention and which produce no effect. The contract of sale or of maintenance until death concluded in official form constitutes the ostensible limb of simulation by the deceased. In reality the transferee pays no price at all for the asset acquired, or pays a sum far below its true value. Outwardly, however, the impression is created that a price has changed hands. The purpose is to block the heirs from whom the asset has been concealed from later having recourse to legal remedies such as abatement.
On this subject, the following assessment was made in the decision of the Assembly of Civil Chambers of the Court of Cassation of 7 October 2021, No. 2018/1-533 E., 2021/1189 K.:
“…..In the Decision on the Unification of Case Law dated 1.4.1974 and numbered 1/2 it was held that; ‘Where it is established that a person, with the aim of depriving an heir of the right of inheritance, declared his intention before the land registry official in the direction of a sale in respect of immovable property registered in the land register which he in fact wished to give away, all heirs whose inheritance rights have been infringed, whether or not they hold a reserved portion, may bring an action asserting that the ostensible contract of sale is simulated on the basis of Article 18 of the Code of Obligations and that the concealed contract of gift is devoid of the requirement of form, and that this right of action shall not affect the rights afforded by Articles 507 and 603 of the Civil Code, which are in issue for valid contracts…..’.
The Agreement to Simulate
Behind the ostensible transaction lies a secret agreement to simulate, formed between the deceased and the other party. By that agreement the parties concur that the transaction reflected outwardly was made only for show, in order to mislead the other heirs, and that it will produce no effect in reality. The agreement need not be in writing. It may be formed before the ostensible contract or contemporaneously with it. The deceased may enter into it in person or through a representative.
The Intent to Deceive the Heirs
There can be no question of simulation by the deceased unless the deceased has an aim of concealing assets. The parties to the simulation create a deliberate discrepancy between their real intention and the declarations they make outwardly. In that way they aim to mislead third parties and to deceive them by presenting a different picture in appearance. If there is no aim of deception, there is no need to conclude a simulated contract at all. That said, the intention to mislead third parties does not render the transaction unlawful; while the simulated transaction is invalid by virtue of that character, it is not unlawful. For that reason, where simulation is established, the parties are obliged to restore what they have received according to the rules on unjust enrichment.
On this point, the following findings were made in the decision of the Assembly of Civil Chambers of the Court of Cassation of 30 September 2021, No. 2017/1-2339 E., 2021/1138 K.:
“The element that distinguishes simulation by the deceased from the other forms of relative simulation is that it is carried out with the aim of deceiving the heirs. Put more plainly, as stated in the Decision on the Unification of Case Law dated 1.4.1974 and numbered 1/2, in this type of simulation the deceased, with the aim of depriving an heir of the right of inheritance, declares his intention before the land registry official in the form of a sale or a contract of maintenance until death in respect of immovable property registered in the land registry which he in fact wishes to give away.
For that reason, the real intention and aim of the deceased in carrying out the simulated transaction must be to conceal assets from the heirs. Where the deceased has no aim of concealing assets from the heirs, there is no possibility of applying the Decision on the Unification of Case Law dated 1.4.1974 and numbered 1/2.”
The Concealed Transaction
In simulation by the deceased the concealed transaction is the contract of gift in which the deceased and the other party disclose their real intentions to one another but keep them hidden from the heirs from whom the assets are being concealed. The ostensible transaction reflected outwardly is invalid because it does not coincide with the parties’ real intention. The concealed transaction, on the other hand, being consistent with the parties’ intention, is accepted as valid to the extent that it satisfies the required conditions of form.
Establishing the True Intention of the Deceased
What is decisive in allegations of simulation by the deceased is bringing to light the real intention between the parties. The following criteria are assessed in determining the deceased’s true intention:
- The parties’ conduct. The attitudes displayed after the transaction are among the strongest indicators of the real intention. For instance, the deceased continuing to use the asset transferred, or continuing to keep control of it, may indicate that the aim was not to make a gift but to retain the asset.
- Express declarations and agreements between the parties. Written or oral understandings, mutual correspondence, letters and similar documents carry significant evidential value in revealing the deceased’s true intention.
- Evidence of an indirect character. Witness statements, records of correspondence, bank account movements and other financial documents may also be used in determining the true intention.
The assessment is made having regard to all of these elements taken together. The courts weigh the evidence as a whole and seek to arrive at the deceased’s real intention. Depending on the complexity of the case and the strength of the evidence, however, this process can prove arduous.
Which Transactions Count as Concealing Assets?
Registered Immovable Property Shown as Sold to One of the Heirs
The deceased shows in the land register as a sale the registered immovable property he or she has in fact given away. That contract of sale, not reflecting the parties’ real intention, is invalid by reason of simulation. The contract of gift concealed behind it likewise does not acquire validity, since the conditions of form have not been observed.
Transfer Effected Through an Intermediate Owner
In this method the deceased transfers the immovable property registered in his or her own name in the land registry to a person acting as an intermediate owner. Although on paper the intermediate owner appears as owner for a short period, in reality that person is under the deceased’s direction and control. That person then sells the property at a low price to the intended heir or to another third party. In this way, while the deceased does not outwardly appear to be concealing assets, he or she in fact retains dominion over the property.
An Ostensible Contract of Maintenance Until Death
The deceased draws up, for show, a contract of maintenance until death in respect of registered immovable property that he or she has in fact given away. Because it does not coincide with the real intentions, that contract is invalid; and the concealed contract of gift, not meeting the conditions of form, produces no effect either.
An Ostensible Gift
Where the deceased presents registered immovable property as a gift with the aim of concealing assets from the other heirs, the transaction is likewise treated as invalid, since the parties’ real intention has not been complied with.
Transactions Not Treated as Simulation
Transactions that do not carry an aim of deceiving the heirs or of concealing assets fall outside the scope of simulation. Transfers of that character are valid transactions concluded in a manner consistent with the parties’ real intentions. Dispositions made with an open and genuine intention, behind which there is no secret agreement, cannot be characterised as simulation by the deceased. In such cases there is a lawful agreement between the parties and, since the deceased’s intention contains no aim of concealing assets, the transaction is not treated as simulated. The principal situations assessed within this scope in practice are the following:
- Transfers of registered immovable property in return for payment of the true price, that is, the consideration
- The deceased having an intention to apportion the estate
- Transfers of immovable property not recorded in the land register
- Transactions relating to the transfer of movable property
- Benefits conferred by way of a will
- Benefits conferred by way of a gift
- Transfer of a shareholding in a company or a cooperative
- The situations provided for in the Cadastre Act
- The deceased drawing up a simulated debt instrument
- Registration in the land registry of immovable property sold by the deceased informally
- The establishment of a usufruct over immovable property
- The conclusion of a long-term lease agreement
Annulment of Transfers Subject to Official Form on Grounds of Simulation and the Action for Registration
Simulation by the deceased is defined as the concealment of assets from the heirs by deceiving them. The deceased erodes the estate by making it appear that assets he or she in fact wished to give away were transferred in return for a purchase price or an obligation of care. In that event all heirs whose inheritance rights have been impaired may bring an action seeking a declaration that the simulated disposition is invalid and the annulment of the transactions founded on it.
Who May Bring the Action?
The Decision on the Unification of Case Law of 1974, No. 1/2, has performed a decisive function in this field and has set out expressly those who hold the right of action. According to the decision, where the deceased declares before the land registry official, as a sale, immovable property registered in the land register in respect of which his or her aim was in fact to make a gift, all heirs, whether or not they hold a reserved portion, may bring an action on the ground that their inheritance rights have been infringed. By contrast, persons who have renounced the inheritance, who have waived their inheritance rights and who have been disinherited do not have the capacity to bring this action.
The Burden of Proof
In actions for annulment of title deed and registration founded on simulation by the deceased, the burden of proof lies with the claimant who advances the allegation of simulation. In other words, the party who brings the action asserting that assets have been concealed from him or her must establish by evidence that the deceased’s true aim in the transaction in dispute was to deprive that party of the inheritance. It is further required that the evidence submitted to the file demonstrate the deceased’s simulated true intention and aim with a force that leaves no room for hesitation.
Claimants who are not themselves parties to the transactions whose annulment is sought are, however, often unable to know at first hand the motive for which and the manner in which the transaction was concluded. Because of that reality, settled case law — and the decisions of the Assembly of Civil Chambers of the Court of Cassation above all — accepts that simulation may be proved by every kind of evidence, including witness testimony.
To that effect, the following words appear in the decision of the Assembly of Civil Chambers of the Court of Cassation of 18 February 2021, No. 2018/19-1013 E., 2021/105 K.:
“………Heirs are, as a rule, regarded as parties in the capacity of successors to the legal transactions carried out by the deceased. As a consequence, heirs may benefit only from the means of proof available to the deceased. However, the drawing up of a simulated debt instrument by the deceased is a transaction to the detriment of the heirs, and the legal interests of the heirs and of the deceased are in conflict. For that reason, heirs may prove the action they bring seeking the ineffectiveness of the simulated debt instrument by every kind of evidence, in the capacity of third parties ( Arslantürk, p. 91 ). Indeed, the same matters were also touched upon in the decisions of the Assembly of Civil Chambers of the Court of Cassation of 21.04.1978, No. 1976/13-3608 E., 1978/338 K., and of 12.04.1985, No. 1983/4-558 E., 1985/317 K.
Statute of Limitations and Preclusive Period
Although the heir who brings an action for annulment of title deed and registration founded on simulation by the deceased does not appear as owner in the land registry, that heir is deemed to have acquired the position of holder of a right in rem as at the date of death of the deceased who carried out the simulated transaction. Since rights in rem are not subject to the statute of limitations, an action for simulation by the deceased, resting on a right in rem, is likewise not subject to any statute of limitations or preclusive period. An action for concealing assets from the estate may therefore be brought at any time after the death of the deceased.
Important note: The fact that the simulated transfer became known while the deceased was still alive changes nothing; no action for simulation by the deceased can be brought at that stage. For as long as the deceased is alive, no right accrues to the heirs to bring an action relying on the simulated transaction. This action can be brought only after the death of the deceased.
Court Fees
Actions for annulment of title deed and registration founded on simulation by the deceased are subject to a proportional court fee calculated as a proportion of the value in dispute. Since the value of the immovable property in dispute can most often not be established precisely at the moment the action is brought, a low figure is generally shown at the outset and the fee paid on that basis. Once the value of the property has been determined by a court-appointed expert at the later stages of the proceedings, the fee is completed and the amount claimed may be increased.
In practice this action may also be brought in the alternative together with an action for abatement.
Detailed explanations concerning the most frequently encountered type of action appear in our note titled Action for Annulment of Title Deed and Registration on the Ground of Simulation by the Deceased (Concealing Assets from the Estate).
The Court with Subject-Matter and Territorial Jurisdiction
Subject-matter and territorial jurisdiction in an action for concealing assets from the estate are determined by the following criteria:
Court with territorial jurisdiction: The Civil Court of First Instance at the place where the immovable property in dispute is situated has territorial jurisdiction.
Court with subject-matter jurisdiction: As regards subject matter, the Civil Court of First Instance has likewise been designated.
The Differences Between Simulation by the Deceased and Abatement
Simulation by the deceased and abatement are two separate institutions of succession law and answer different legal situations. The essential distinctions between them may be summarised as follows:
Subject matter and claim:
In simulation by the deceased, the heirs seek the annulment of a legal transaction concluded by the deceased with the aim of deceiving them by concealing or altering his or her true intention.
In abatement, by contrast, the heirs entitled to a reserved portion seek the correction of excessive gifts or transfers of property made by the deceased before death which impair their reserved portions.
The regime of time limits:
Because an action for simulation by the deceased concerns a right in rem, it is not subject to a statute of limitations or to a preclusive period; it may be brought at any time after the death of the deceased.
In an action for abatement, however, the heirs must bring the action within one year of the date on which they learn that their reserved portions have been impaired, and in any event within ten years of the death of the deceased. Once those periods have passed, the right to claim abatement lapses.
The parties:
An action for simulation by the deceased may be brought by each of the heirs, irrespective of whether they hold a reserved portion, and also by the representative of the estate.
An action for abatement, on the other hand, may be brought only by heirs entitled to a reserved portion.
The consequences:
Where simulation is established, the contract is treated as invalid and annulment of the entire land registry entry is ordered.
In an action for abatement, by contrast, an order for abatement is made only in respect of the part exceeding the reserved portion.
Details of the route of abatement available to heirs entitled to a reserved portion are addressed in our note titled What Is an Action for Abatement?
Can the Two Actions Be Brought Together?
Both actions may be brought by the heirs, either on their own or in the alternative — that is, in stages — with a view to the annulment or correction of the dispositions and conveyances made by the deceased.
In an action brought in the alternative, the primary claim is that the transaction carried out by the deceased be annulled in its entirety on the ground of simulation by the deceased. If the court does not find the allegation of simulation well founded, the claim for abatement is examined at the second stage and protection of the reserved portion of the heir entitled to it is sought within the estate.
Where the procedural conditions have been satisfied, ordering the severance — that is, the separation from one another — of actions for simulation by the deceased and for abatement brought in the alternative is regarded as incompatible with procedural economy. Conducting the actions together allows all allegations, defences and evidence to be assessed as a whole and prevents conflicting judgments from arising.
Where both claims are advanced together and in the alternative, subject-matter and territorial jurisdiction lie with the Civil Court of First Instance at the place where the immovable property is situated.
The Independent Legal Assessment
The element that determines the outcome in files concerning simulation by the deceased is the work done on the evidence rather than the legal characterisation. The court looks for the real intention behind the official transaction in the land registry; facts such as whether the price was actually paid, the transferee’s capacity to pay, the difference between the market value at the date of transfer and the price shown, and whether the deceased continued to use the property after the transfer therefore form the backbone of the file. The absence of any time limit, the claim resting on a right in rem, may look like a comfort for the claimant, but the long period that has elapsed creates serious difficulties in obtaining evidence.
Secondly, how the claim is to be framed is a strategic choice. Placing the claim for abatement at the second stage, so that the reserved portion is not left wholly unprotected if the allegation of simulation is not accepted, is a widespread and sound approach in practice. Since abatement is subject to periods of one year and ten years, however, the alternative claim must be advanced in good time.
In a specific dispute we recommend that the following matters be addressed first:
- Verifying the claimant’s status as an heir as regards transactions causing loss of rights, such as renunciation or waiver
- Tracing through the land registry records whether an intermediate owner was used in the chain of transfers
- Investigating from the outset the bank and financial records showing that the price was genuinely paid
- Documenting the difference between the true value at the date of transfer and the price stated in the official deed
- Drawing up the list of witnesses with care, bearing in mind that simulation may be proved by every kind of evidence
- Advancing the claim for abatement in the alternative and calendaring the periods relating to it
Independent Legal provides advisory services and conducts litigation throughout the entire process in allegations of concealing assets from the estate, from framing the claims for annulment of title deed and registration and for abatement together to the conclusion of the proceedings.