Usufruct and bare ownership

The dismemberment of ownership is the division of the ownership of a property into two distinct rights: the usufruct and the bare ownership. The usufructuary has the right to use the property and collect its income (rent, dividends, fruits), subject to preserving its substance (article 578 of the French Civil Code); the bare owner retains the right to dispose of it, but cannot enjoy it as long as the usufruct lasts. On extinction of the usufruct, the bare owner automatically recovers full ownership.

The tax value of the usufruct and the bare ownership is determined under the scale of article 669 of the French Tax Code, based on the age of the usufructuary. The usufruct is worth 90% of the full-ownership value when the usufructuary is under 21, then decreases in ten-year brackets: 60% from 41 to 50, 50% from 51 to 60, 40% from 61 to 70, 30% from 71 to 80, 20% from 81 to 90, then 10% beyond 91. The bare ownership represents the complement to 100%. This scale serves as the taxable base for gift and inheritance duties.

A usufruct granted for a fixed period, known as a temporary usufruct, is valued at 23% of the full-ownership value per ten-year period, without fractions and without exceeding the value of the life usufruct resulting from the age-based scale (article 669, II of the French Tax Code). This valuation method is relevant in particular for temporary gifts of usufruct, for example in favour of an adult child during their studies, or the creation of a temporary usufruct for the benefit of a charitable body.

No. When the usufruct is extinguished through the expiry of the fixed term or the death of the usufructuary, its reunification with the bare ownership gives rise to no tax or duty (article 1133 of the French Tax Code). The bare owner recovers full ownership of the property free of transfer duties. This is what makes the gift of bare ownership with reservation of usufruct so efficient for tax purposes: duties are paid only once, on the value of the bare ownership alone as at the date of the gift.

Dividends regularly distributed constitute fruits which accrue, in principle, to the usufructuary (article 582 of the French Civil Code). By contrast, where a dividend is paid out of reserves, the Cour de cassation holds that the usufructuary's right of enjoyment takes the form, unless otherwise agreed, of a quasi-usufruct over the proceeds of that distribution (Cass. com., 27 May 2015, no. 14-16.246): the usufructuary receives the sums but remains liable for a restitution debt due on termination of the usufruct. The allocation key should be specified in the articles of association and, where appropriate, in a quasi-usufruct agreement. See our dedicated quasi-usufruct page.

The usufructuary bears the maintenance charges and routine repairs of the property (article 605 of the French Civil Code) as well as annual charges such as property tax and expenses relating to its enjoyment. The bare owner bears the major repairs listed in article 606 of the French Civil Code (main walls, vaults, beams, entire roofs, dykes, retaining and boundary walls). This allocation may be adjusted by agreement between the parties, which is often advisable in a transfer operation.

Yes, the dismemberment of ownership is one of the central tools of estate planning. By giving the bare ownership of a property while reserving the usufruct, the donor transfers the asset to their heirs at a tax cost calculated on the value of the bare ownership alone (scale of article 669 of the French Tax Code), retains the enjoyment and income of the property for life, and enables the heirs to receive full ownership free of duties on death (article 1133 of the French Tax Code). The operation may cover real estate or company shares, or be combined with a fiducie for the most sophisticated arrangements.