Whether legal, resulting from a donation to the last person living or from a clause in a marriage contract, usufruct allows the spouse to retain income or the enjoyment of property until the end of his life. “In this sense, it is a protective right. But we have to ask ourselves who we want to protect: the spouse or the children? “ asks Gilles Bonnet, a notary in Paris.
The Usufruct Trap
“I don’t think that the option which allows the spouse to collect the entire estate in usufruct is the best choice, neither for the spouse nor for the children. Especially if the surviving spouse is still relatively young and the spouse has children from a previous union. If the usufruct lasts about twenty years, it is likely that there will be major work to be done. Gold it is the bare owners, therefore the children, who will have to pay for the work. It is not certain that they have the means, nor the desire. In addition, if the surviving spouse wants to sell a property, he cannot do so without the permission of the naked children “, adds Arlette Darmon, notary in Paris, president of the Monassier group.
The older the spouse, the less income he will need and he may wish to pass the burden and income from his property to the children. Of course, nothing prevents him from giving up the usufruct to them. The children will then regain full ownership sooner than expected. But this creates taxable material. If the liberal intention is proven, it is considered to be an indirect gift subject to gift tax.
“It is better toorganize in advance the extinction of the usufruct depending on each person’s situation and providing for a fixed period. For example, it is possible to foresee that the usufruct will end when the child has reached 25 or 30 years old, so that he regains full ownership when he really needs it “, suggests Gilles Bonnet.
Pay attention to the statutes of the company
Another precaution to take: “Look at the company’s articles of association to make sure that they are compatible with the decisions that one takes elsewhere to organize the protection of his spouse. If this is not the case, it will be necessary to think about modifying the statutes. For example, if the articles of association provide for an authorization clause, that is to say which makes the entry of heirs into the company subject to obtaining authorization, it will be necessary to ensure that its content and the manner of which this clause is worded are not such as to prevent it from actually becoming a partner, nor from receiving dividends ”, recommends Arlette Darmon.
If the surviving spouse finds himself usufructuary of the shares transferred by his deceased spouse, and the children, holders of bare ownership, it will also be necessary to ensure determine in advance the rights of each. This can go through a review of the statutes. Because if there is no doubt that the bare owner has the quality of partner, the question remains debated for the usufructuary.
Regarding the right to vote, it belongs to the usufructuary for all questions concerning the allocation of profits and to the bare owner for all other decisions in simplified joint stock companies and limited liability companies (SARL). But in joint-stock companies other than SAS, a distinction exists between ordinary general meeting (AGO) and extraordinary general meeting (EGM): the voting right goes to the usufructuary in AGO, while it belongs to the bare owner. by age ! But it is possible to derogate from these rules, in the statutes.
Cross-dismemberment for unmarried couples
Unlike married couples, unmarried couples have no specific tool to organize the protection of their partner or surviving cohabiting partner: they cannot use either the marital advantages or the donations to the last living. “But they can use the technique of cross-dismemberment of shares to protect each other ”, recommends Marion Capèle, director of the Wealth Solutions division at Natixis Wealth Management. The scheme used is as follows: the couple creates a real estate company (SCI) which buys the common accommodation (or to which one of the partners or cohabiting partners provides accommodation which they already own).
Each member of the couple is then allocated shares in the amount of his participation in the capital. But instead of these shares being theirs in full ownership, each receives the usufruct of the shares whose bare ownership is held by the other and vice versa. Upon the death of the first of the two, the survivor recovers full ownership of the shares he held in bare ownership, without any right to pay. He retains the usufruct of the other part of the shares whose bare ownership is transmitted to the heirs of his deceased partner or partner. This solution allows the survivor to stay in his home until his death, without having to pay inheritance tax.