Have you considered donating your home to your children while you are still alive, but you want to continue living in it? Are you worried about your spouse's situation after your death? Do you want to obtain liquidity to enjoy the last years of your life but you are afraid of selling it? home and nowhere to go? For all these cases, life usufruct may be the solution.
In the area of inheritance, the use of life usufruct is very common , a legal formula that allows a person to enjoy an asset, even if the property falls to another. We explain what this figure consists of.
What is life usufruct?
To understand what life usufruct consists of, it is necessary to start from some basic legal concepts. In Spanish legislation, full ownership is composed of bare ownership, which answers the question 'Whose property is it?', and the usufruct, which refers to 'Who makes effective use of it?'
In this way, we can find people who are enjoying a good and its fruits, even though the property itself belongs to another, thanks to the usufruct which, according to the Civil Code , in its article 467, "gives the right to enjoy the goods others with the obligation to preserve their form and substance, unless the title of their constitution or the law authorizes otherwise."
As a consequence, the usufructuary can make use and enjoyment of the property , that is, obtain its fruits or returns, whether in kind or monetary, but cannot freely dispose of it because he does not have the right of ownership , until such time as it is given due to the termination of the usufruct, either due to the death or resignation of the usufructuary, or due to the loss of the property in question.
This real right may be temporary, that is, for a certain period of time; or lifelong, which remains in force until the death of the usufructuary (the person who enjoys the property), then full ownership passes to the owner. For this reason , life usufruct is very common in the field of inheritance and is closely linked to real estate.
When does life usufruct occur?
However, the life usufruct can be established on different assets :
? Of money: in this case, the usufructuary has the right to the interest generated by a certain amount of money.
? Of shares or interests in a company: receiving the dividends that they produce while the usufruct lasts.
? Of real estate: which allows the usufructuary to use the property or rent it out to receive the rent.
Thus, it is common for testators to establish a life usufruct over their homes. This would be the case, for example, of parents who decide to donate their property to their children while they are alive, but maintain the life usufruct in their name until they die. However, in this case, the Supreme Court's doctrine states that the constitution of usufruct over a property free of charge (donation) must be made in a public deed for it to be valid.
Another common situation is when a person dies and a life usufruct is established in favor of the widowed spouse so that the surviving parent is not left unprotected after the distribution of the legitimate shares among the heirs. The children will be the owners, but they will not be able to sell, rent or use the property until the surviving ancestor dies or a financial agreement is reached regarding it.
In addition, in recent years, life usufruct has gained strength as a way of obtaining an economic fund during old age. This practice leads some elderly people to sell their house, but subject to a life usufruct, so that they can continue to enjoy it. the same for the rest of their lives , but receiving liquidity that allows them to get through the last period with solvency.
How is life usufruct valued?
As we said, the life usufruct can be quantified , an economic assessment that is essential to calculate the gift and inheritance tax, in cases where the usufructuary wants to renounce his right in exchange for an amount, or to determine the price of the purchase and sale of a home in which the purchaser will not enjoy full ownership.
The calculation of the value of the life usufruct is developed in the Inheritance and Gift Tax , which establishes that it is equal to 70% of the total value of the property (in full ownership) when the usufructuary is less than 20 years of age, decreasing by 1%. As age increases, the minimum limit is 10%. The following formula is usually used to obtain it:
The value of usufruct = 89 – age of the usufructuary
For example, let's say a man dies and leaves his 50-year-old wife the usufruct of a house worth 300,000 euros. In this case, the value of the life usufruct would be: 39% (89-50) of the value of the property. the property, that is, 117,000 euros.
If the usufruct falls on two people, such as parents who decide to donate their apartment during their lifetime, maintaining the enjoyment of it, the age of the youngest is taken as a reference. For example, in the case of a married couple of 70 and 76 years old who donates his house valued at 150,000 euros to his children, the value of the life usufruct would be 19% (89-70) of the 150,000 euros, that is, 28,500 euros.