The tontine clause (tontine pact) included in the act of buying real estate can be advantageous, if you buy together. It avoids the risks of joint ownership and guarantees ownership of the entire property, to the survivor.
How to create a tontine?
Careful, as tontine may not be suitable for your situation and can at times turn into a real trap.
As a "random" contract, a tontine purchase must respect hazard conditions. The buyers must all finance part of the property and have a similar life expectancy. Otherwise, the tontine purchase can be requalified as a donation .
How does tontine work?
During the lifetime of the buyers:
The risk: You always need unanimity to take action; If the buyers no longer get along (or wishes to separate), they can decide to sell the property or agree that one of them will buy the other's share. Unanimity is required in this case, because, unlike what happens in a joint ownership , the buyers cannot induce partition in court, or even ask for selling the home. Indeed, the old saying "nobody can remain undivided" is not applicable.
On the death of one of the buyers:
The predeceased person is declared never to have bought, only the surviving purchaser is considered as the owner, right from the start. The heirs of the deceased therefore have no right on the property (the property is not part of the heritage of the deceased). However, the surviving purchaser must pay inheritance tax , calculated on the degree of relationship he has with the deceased and the value of the share he receives (free between spouses and civil union partners, 60% between cohabiting partners after a reduction of 1594€). However, there is an exception to this rule. When the property makes up the main residence of the purchasers at the time of death and its value is less than 76,000€, the survivor only pays transfer duties against payment (i.e. the maximum legal rate of 5.81%).
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