The partition of assets during life in the Colombian legal system

One of the main causes of discord within Colombian families arises at the time when the succession of the parents must be carried out, since such situation may lead to differences among their heirs regarding the assets received and their value.

Although the classic figure of the will allows foreseeing this type of circumstances, once the death of the person has occurred, he/she is left without the possibility of verifying the fulfillment of his/her last will, which makes it easier for his/her heirs not to accept what was established in the will, thus leaving the door open to the occurrence of family conflicts of patrimonial nature.

It is for this reason that in 2012 the figure of partition of estate in life was introduced to the national legal system, regulated in the paragraph of article 487 of the General Code of the Process. This mechanism allows a person to proceed to the adjudication of the assets that make up his estate, through the granting of a public deed prior to obtaining an authorization from a family judge, all this without the need to initiate a succession process, as long as the mandatory legal provisions that regulate the forced assignments and rights of third parties are respected.

Despite the fact that the regulation of the procedure for the partition of assets during life consists of only one article in our civil procedural codification, without regulating in a precise manner the procedure to be followed, the Constitutional Court in Decision C-683 of 2014 indicated that, since it is a figure so close to the succession issue, both substantial and procedural aspects that regulate the succession procedure must necessarily be taken into account.

From the tax point of view, the partition of the estate during life grants a practical advantage with respect to the traditional succession process, which consists in the possibility of structuring the awards in such a way that the payment of the occasional gain tax payable by the beneficiary is deferred through the award of the bare ownership of one or several assets (reserving the usufruct to the transferor), at which time a first part of the tax will be paid and the second part will be paid at the time the ownership is consolidated in the head of the awardee.

It should be noted that, although this mechanism allows the interested party to distribute his estate during his lifetime according to his will, the forced assignments established by the Colombian Civil Code must be respected, in addition to the rights of the creditors of the interested party in the process. If the limits imposed by law are not respected, Article 487 of the General Code of the Process establishes that the rescission of the partition may be requested within two (2) years from the date on which they had or should have had knowledge of the proceeding.

Care must be taken in the structuring of the awards that are intended to be made within the partition proceeding, since the rule is silent with respect to the assets that are acquired by the person who made the partition or that arise for other reasons, after said proceeding, since the rule does not expressly regulate such events.

Thus, although the figure of partition of assets during life was introduced seven years ago and has had little roots in the Colombian legal tradition, it can be very useful for those persons who wish to carry out the distribution of their assets during their lifetime, thus reducing the possibility of family conflicts after their death.