What is a usufruct?

A usufruct is a legal right given by the owner of a property to a person, usually for a specified period, to use and enjoy the property as if it were their own. This means that the usufructuary has the right to occupy the property and collect any income or profits from it. Subject to certain limitations, the usufructuary may also make necessary changes or improvements to the property.

An example of a usufruct would be if a father leaves a farm to his son in his will but stipulates that his wife should have continued use of the house on the farm until her death (or any other specified period). Upon the father’s death, the property would be transferred to the son, and the wife’s usufruct would be registered simultaneously against the title deed.

The wife, in this instance, has a limited right. She can live in the house but cannot sell the property, mortgage it, or leave it to someone else in her will. She also has certain obligations. Those include maintaining the property and paying rates and taxes. Only upon her death would the usufruct lapse, and the full property rights would automatically vest in her son.

During her lifetime, the son can use the house as security to obtain a mortgage, as he is the legal owner. But he is bound by the terms of the usufruct and may not infringe on the usufructuary’s rights. That means he cannot sell the property without the consent of the usufructuary.

For example, if the son decided to quit farming and wanted to sell the farm, which would include the house, his mother would have to agree to the sale, and both would also have to agree on how to divide the proceeds.

A usufruct is an excellent way for a husband to make provision for his wife and still bequeath a property to his children. The tax benefit in a situation like this is that the usufruct reduces the amount of estate duty payable by the testator’s estate. The value of the entire inherited property is reduced by the value of the usufruct.

In a different scenario that doesn’t involve a will, a usufruct can be granted by the seller of a property in a cession or notarial deed to reduce the amount of transfer duty. There are different tax implications in this scenario.