Understand usufruct (life interest)
The usufructuary has the right of possession and use of the property, but he is not the owner. Attention: do not confuse usufruct and right of use and habitation.
What does usufruct mean?
Let us take the example of housing. You should know that the right to property gives the owner three sorts of prerogatives:
- the right to use the accommodation (live in it),
- the right to collect income from housing (rent it),
- the right to dispose the home (sell it) It is possible, for the owner, to divide these prerogatives into two groups:
- on one hand the usufruct which includes the right to use and collect the income
- on the other hand bare ownership which includes the right to dispose.
The right of ownership is therefore the combination of usufruct and bare ownership.
Usufruct is most often viatical, which means it comes to an end through the death of its holder. It can also be constituted for a fixed period; this is known as temporary usufruct. The one who has the right to use the accommodation and to receive the income is the usufructuary, the one who has the right to dispose of the accommodation is the bare owner.
We must not confuse usufruct and right of use and habitation. The right of use and habitation is strictly personal and is limited to the sole dwelling of the accommodation (without being able to rent it) while the usufruct is a genuine right and can concern both buildings and furniture (e.g.: securities portfolio).
How to calculate usufruct?
If, for example
- the usufructuary and the bare owner agree to sell the property, how can the price be shared between them?
- your parents give you the bare ownership of an apartment, on what value will the Treasury be taxing you?
The question of valuing usufruct and bare ownership (the two are indeed related) is therefore particularly important. A tax scale is required to calculate the rights owed by the usufructuary and/ or the bare owner in the case of donations, inheritances, sales, exchanges, contributions to society, etc.
|Age of the usufructuary||Value of the usufruct as a percentage
of the value of the full ownership
|Up to 20 years||90%|
|21 to 30 years||80%|
|31 to 40 years||70%|
|41 to 50 years||60%|
|51 to 60 years||50%|
|61 to 70 years||40%|
|71 to 80 years||30%|
|81 to 90 years||20%|
|Over 91 years||10%|
The parties may, in their relations, use this scale. But the principle is that they must themselves assess the usufruct on a case-per-case basis (this is then known as an "economic usufruct") which takes into account the life expectancy of the usufructuary and the rate of return of the property.
In the event of a fixed-term usufruct (temporary usufruct), it is estimated for tax purposes at 23% of the value of the full ownership for each period of 10 years and without fraction (23% from 0 to 10 years, 46% from 11 to 20 years and 69% from 21 to 30 years).
It must be reminded that the right of use and habitation is assessed by the tax authorities at 60% of the value of the life interest.
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