Contract for Lifetime and Until-Death Support: Differences and Property Transfer

Many elderly property owners in Croatia wish to secure care for themselves in advance and arrange the transfer of their property in a legally sustainable and clearly defined manner. In practice, the most common instruments for this are the contract of lifelong maintenance and the contract of until-death maintenance, but these two institutions are often mistakenly equated, although they produce very different legal consequences.

For owners of apartments, houses, and other property, the difference is not just terminological. It determines who is the owner of the real estate during the life of the maintenance recipient, how rights are registered in land registers, what the tax treatment looks like, and what happens if the relationship between the parties deteriorates. In this guide, the focus is on the transfer of real estate, although a maintenance contract can also cover other property.

Contents

• What is a lifelong maintenance contract
• What is an until-death maintenance contract
• Key difference: moment of ownership transfer
• Mandatory contract form and Register
• Entry in land registers
• Rights and obligations of parties
• Termination of contract
• Tax treatment of transfer
• Risks for both parties
• How to choose between the two contracts
• How Regent Real Estate Agency can help you
• FAQ
• Recommended

What is a lifelong maintenance contract

The lifelong maintenance contract is regulated by the Law on Obligations as a contract by which the maintenance provider undertakes to support the other party or a third person until death, and the maintenance recipient declares that in return they are giving all or part of their property, with the transfer of that property taking place only after the recipient's death. It is important to emphasize that this is not an inheritance law contract, but an obligation law contract for the alienation of property for consideration, where the transfer is postponed until the recipient's death.

In the context of real estate, this means that the recipient remains the owner of the apartment, house, or other contracted real estate during their lifetime. The provider does not dispose of the property as an owner during the recipient's lifetime but acquires the right of expectation that they will become the owner after the recipient's death if they duly fulfill the contracted obligations.

Professional advice: If the subject of the contract is real estate, it is advisable to immediately consider the method of land registry protection for the provider's future right, so that the contract does not remain "invisible" to third parties.

What is an until-death maintenance contract

The until-death maintenance contract is legally similar in purpose, but its structure is significantly different. The maintenance provider here also undertakes to support the recipient until their death, but the recipient transfers the property immediately during their lifetime, and not only after death.

In the case of real estate, this means that the provider becomes the owner of the property upon the conclusion of the contract, while the recipient most often retains the right of residence or usufruct so that they can continue to use the property until the end of their life. This is precisely why the until-death maintenance contract is riskier for the recipient if the relationship between the parties later becomes problematic.

Professional advice: In the case of until-death maintenance, the recipient's rights should be precisely secured both by contract and by land registry entry, especially if the recipient continues to live in the property that is no longer their ownership.

Key difference: moment of ownership transfer

The fundamental difference between lifelong and until-death maintenance contracts relates to the moment of property transfer to the maintenance provider. In lifelong maintenance, the transfer of real estate occurs only upon the death of the recipient, while in until-death maintenance, it occurs immediately upon the conclusion of the contract.

This difference changes almost everything else: who is the formal owner during the recipient's lifetime, who is exposed to the risk of enforcement and creditors, what the tax treatment looks like, how complex termination is, and what level of protection the recipient has if a dispute arises. Therefore, the choice between these two contracts is not just a matter of name, but a decision on when and under what conditions you want to transfer the property.

Mandatory contract form and Register

Both contracts are strictly formal. They must be drawn up in writing and certified by a judge of the competent court or confirmed by a public notary, or drawn up as a public notary act. The authorized person must read the contract to the parties, verify that they understand the rights and obligations arising from it, and warn them about its consequences.

Recent regulations further strengthen the protection of maintenance recipients. A Register of lifelong and until-death maintenance contracts has been introduced, and the number of contracts that one provider can have simultaneously is also limited. The purpose of these rules is to reduce the risk of abuse and prevent the conclusion of too many contracts that the provider realistically cannot duly fulfill.

Professional advice: In addition to the formal validity of the contract, it is equally important that the content of the maintenance is described in detail – who provides housing, food, care, medicines, utilities, costs of home assistance, and eventual funeral expenses.

Entry in land registers

In the case of until-death maintenance contracts, the transfer of ownership to the maintenance provider is usually entered in the land registers. If a right of residence or usufruct is agreed upon in favor of the recipient, this right should also be duly registered to be visible and protected against third parties.

In the case of lifelong maintenance contracts, the transfer of ownership is not carried out immediately because the recipient remains the owner until death. Therefore, in practice, a notice of the contract is entered in the land registers to make the provider's future right visible and protected.

Professional advice: Before signing and after the registration, request a new land registry extract and check whether all entries have been made exactly as agreed.

Rights and obligations of parties

The provider's primary obligation is maintenance, but law and practice show that it is precisely the vaguely agreed content of maintenance that most often creates room for disputes. Therefore, the contract should precisely describe what maintenance includes: housing, food, home assistance, care, accompaniment to the doctor, payment of utilities, medicines, and other expenses, depending on the specific relationship between the parties.

The recipient's primary counter-performance is the transfer of the agreed property – deferred in lifelong maintenance, or immediate in until-death maintenance. The new regulation further emphasizes the importance of precisely defining the content of maintenance to avoid future disputes about what the provider was actually obliged to provide.

Professional advice: Alongside the contract, it is useful to keep proper records of the actual maintenance provided – invoices, receipts, medical documentation, payments, and other evidence that may later be crucial.

Termination of contract

Both contracts can be terminated by mutual agreement, but also by court order when one party seriously breaches its obligations or when the relationships between the parties are so disrupted that further fulfillment of the contract is no longer possible or is clearly unfair. In practice, termination is most often sought due to non-fulfillment of maintenance obligations, serious conflicts between parties, neglect of the recipient, or other circumstances that make the contractual relationship unsustainable.

Termination is not equally sensitive for both contracts. In the case of a lifelong maintenance contract, the transfer of ownership has not yet occurred, so the legal situation is simpler. In the case of an until-death maintenance contract, ownership has already been transferred, so termination also raises the question of returning the property to its previous state, which makes the process more complex. It is also important that disputes regarding the amendment, termination, determination of nullity, and annulment of these contracts are designated by law as urgent procedures.

Professional advice: If you opt for until-death maintenance, arrange in advance in the contract what happens in case of a serious breach of obligations, so that any return of the property is legally clearer.

Tax treatment of transfer

The tax treatment of real estate transfer based on a lifelong or until-death maintenance contract should not be assumed in advance. As a rule, such acquisitions are associated with real estate transfer tax, but the type of contract affects the moment the tax liability arises and the possible application of special treatment according to the current law.

In the case of a lifelong maintenance contract, the moment of transfer is linked to the death of the recipient, while in the case of an until-death maintenance contract, the transfer occurs immediately, which can have important practical consequences for the tax moment and financial planning of the transaction. Since tax regulations and their application may depend on the type of contract, the relationship between the parties, and other circumstances, it is necessary to check the current situation directly with the Tax Administration or a professional handling the case before signing.

Professional advice: Don't leave the tax part for the end. A comparison of lifelong and until-death maintenance makes no sense without first checking how each option affects the total cost of real estate transfer.

Risks for both parties

In the case of an until-death maintenance contract, the greatest risk for the recipient is that they transfer ownership immediately, and later depend on whether the provider will duly and long-term fulfill their obligations. If the provider ceases to provide the agreed maintenance, the recipient is no longer the owner and must protect their rights through a more demanding legal procedure.

In the case of a lifelong maintenance contract, the risk is greater for the provider, because the maintenance obligation can last for a long and uncertain period, and the transfer of real estate only follows at the end. With both contracts, there is also the risk of subsequent challenge, especially if heirs claim that maintenance was not actually provided, that the recipient was not capable of judgment, or that the contract only formally concealed a donation. Additionally, the recipient should keep in mind that the law limits the number of contracts a single provider can have simultaneously, precisely to reduce the risk of abuse.

Professional advice: Before signing, check both the personal relationship of trust and the legal structure of protection. A good contract is not a substitute for trust, but it is its necessary complement.

How to choose between the two contracts

There is no universally better choice. An owner who wishes to retain ownership of the property until the end of their life, with a greater level of control, will more often lean towards a lifelong maintenance contract. On the other hand, a provider who wants greater certainty that they will indeed acquire the property and that their right will immediately be visible in the land registers will more often prefer until-death maintenance.

In practice, the decision depends on the relationship between the parties, the quality of the contractual arrangement, the family situation, the expected tax treatment, and the level of risk the parties are willing to accept. Practical examples can help in understanding the differences, but specific legal advice should always be tailored to the actual situation and the property in question.

Professional advice: Before making a final decision, compare both models on the same property and in the same family situation – only then will you truly see which option better protects your interests.

Frequently asked questions (FAQ)

1. What is the main difference between lifelong and until-death maintenance?
The main difference is the moment of property transfer. In a lifelong maintenance contract, the property transfers to the provider only after the death of the recipient, who remains the owner until then. In an until-death maintenance contract, the transfer occurs immediately upon the conclusion of the contract, most often with the retention of the right of residence or usufruct in favor of the recipient.

2. Does the contract have to be concluded with a public notary?
The contract must be drawn up in writing and certified by a judge of the competent court or confirmed by a public notary, or drawn up as a public notary act. In practice, it is most often concluded with a public notary, who must read the contract to the parties and warn them of its consequences.

3. Can heirs challenge the contract?
Yes. Heirs can try to challenge the contract if they believe that the recipient was not capable of judgment, that maintenance was not actually and properly provided, or that the contract only formally concealed another legal transaction. Proper documentation of the provided maintenance and a correctly drawn up contract significantly reduce this risk.

4. How is the contract registered in the land registers?
In until-death maintenance, the transfer of ownership to the provider is generally registered immediately, and, if necessary, the right of residence or usufruct in favor of the recipient. In lifelong maintenance, the transfer of ownership follows after the recipient's death, while during their lifetime, a notice of the contract is typically registered to protect the provider's future right.

5. Is tax paid on the transfer of real estate with these contracts?
Such acquisitions generally fall under the real estate transfer tax system, but the type of contract affects the moment the tax liability arises and possible special treatment according to current law. Therefore, the tax treatment should always be checked before signing, and not only after the conclusion of the contract.

6. Can the contract be terminated?
Yes. Both contracts can be terminated by mutual agreement or by court order, for example, due to non-fulfillment of obligations or seriously disturbed relations. In until-death maintenance, termination is more sensitive because ownership has already been transferred, so the return of the property also needs to be arranged.

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• Registration of real estate in Croatia: what it is, how it works, and what you need to know
• Buying real estate for retirement and the golden age
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