Quasi-usufruct
A usufruct over a sum of money: the usufructuary may use it, subject to returning the equivalent to the bare owner at the end.
Please note.This definition is deliberately simplified. It does not constitute legal or tax advice. The exact conditions, thresholds, rates and periods depend on your situation and on the regulations in force.
Which text applies?
- Art. 587 of the French Civil Code : Where the usufruct includes things that cannot be used without being consumed, such as money, the usufructuary may use them, subject to returning at the end of the usufruct things of the same quantity and quality or their value estimated at the date of restitution.
- Art. 621 of the French Civil Code : Where the usufruct and the bare ownership of an asset are sold together, the price is divided according to the respective value of each right, unless the parties agree to carry the usufruct over to the price.
- Art. 774 bis of the French Tax Code (CGI) : For estates opened on or after 29 December 2023, the restitution debt relating to a sum of money over which the deceased had reserved the usufruct is not deductible from the estate, subject to exceptions; its value is subject to inheritance tax payable by the bare owner.
- French tax guidelines (BOFiP), BOI-ENR-DMTG-10-40-20-20, § 200 to 290 : The tax authorities’ commentary on the scope of article 774 bis, its exceptions and the calculation of the tax.
Origin
A quasi-usufruct arises where the usufruct relates to a sum of money from the outset, for example after a gift of the bare ownership of a sum, or in an estate where the surviving spouse receives the usufruct of bank deposits. It also arises where an asset held in split ownership is sold and the usufructuary and the bare owner agree to carry the usufruct over to the price. Failing such an agreement, the price is divided between them according to the value of their rights.
Restitution debt
When the usufruct ends, most often on the usufructuary’s death, the bare owner becomes the creditor of a sum equal to the one received in quasi-usufruct. The claim is generally recorded in writing, in the deed of gift or in a quasi-usufruct agreement, to establish its amount and origin.
On the usufructuary’s death
- The restitution debt relating to a sum of money over which the deceased had reserved the usufruct is not deductible from the estate (estates opened on or after 29 December 2023).
- The corresponding value is subject to inheritance tax payable by the bare owner, calculated according to their family relationship with the usufructuary at the time of the estate or, where the tax is lower, at the time the usufruct was created. Tax paid when the usufruct was created is credited, without any refund.
- The law excludes from this regime debts arising on the sale price of an asset over which the deceased had reserved the usufruct, provided it is shown that they were not incurred for a mainly tax purpose, and the surviving spouse’s usufructs resulting from articles 757 or 1094-1 of the French Civil Code.
- The tax authorities also accept that the provision does not apply to sums arising from a transaction the deceased did not initiate (compensation for compulsory purchase or insurance, dividends paid out of reserves), nor to a usufruct received as beneficiary of a life insurance policy (BOI-ENR-DMTG-10-40-20-20, § 270 and 275).
How does the rule apply? A worked example
Sale of shares held in split ownership, with the usufruct carried over to the price
Illustrative example: a parent gave their child the bare ownership of shares and kept the usufruct. The shares are sold for €800,000 and the parties agree to carry the usufruct over to the price. The parent uses the money; on the parent’s death, the child is the creditor of the restitution. The treatment of this debt depends on whether the absence of a mainly tax purpose is shown.
- Sale price carried over in quasi-usufruct
- €800,000
- Restitution debt on death
- €800,000
- No mainly tax purpose shown: debt deducted from the estate
- − €800,000
- Otherwise: debt not deductible, value taxed in the bare owner’s name
- €800,000
Rules checked on .
Which related concepts should you know?
A question about your situation?
Every situation is unique. Let’s discuss yours during a first, confidential meeting.
Book a consultation