Usufruct (Usufruct Rights)

What is usufruct?

In France, usufruct is a legal right that allows an individual—referred to as the usufructuary—to use an asset and receive the income it generates without owning it.

In practical terms, the usufructuary may use the asset (for example, live in a property), rent it out, or collect the income it produces (such as rents, interest, or dividends). The bare owner retains the right to dispose of the asset, subject to the usufructuary’s rights.

By nature, usufruct is temporary; it may be granted for life and end upon death, or be set for a fixed term.

Upon its termination, the bare owner automatically regains full ownership, without any specific formalities.

Usufruct is part of the mechanism of divided ownership, which is widely used in wealth management, inheritance planning, and taxoptimization, particularly in France.

How usufruct works

The usufructuary may:

• use the asset (e.g. live in it)
• rent out the asset​​​​​​
• receive the income it generates (rents, interest, dividends)
• transfer or gift their usufruct rights, subject to certain conditions

The bare owner retains: 

• legal title to the property
• the right to recover full ownership at the end of the usufruct
• a right to ensure the preservation of the asset’s substance

Concrete examples of usufruct

Usufruct of real estate

• living in an apartment you do not own
• receiving rental income from a house
• allowing a third party to occupy the property
• entering into a lease agreement

Usufruct in an inheritance context

The surviving spouse often receives usufruct over the family estate, particularly the primary residence. This situation is common when there are children from the marriage (option for full usufruct of the estate).

Usufruct over financial investments

• interest from savings accounts
• dividends from shares
• income from bonds
• proceeds generated by certain capitalisation contracts

Duration of usufruct

Usufruct is temporary and is often:

• for life (until the death of the usufructuary)
• set for a fixed period (e.g. 10, 20, or 30 years)

At the end of this period, the bare owner automatically regains full ownership, without any specific formalities.

Usufruct and taxation

• Usufruct is governed by the French Civil Code
• It has a direct impact on inheritance tax
• The tax value of usufruct depends on the age of the usufructuary, according to a scale set by the tax authorities (Article 669 of the French General Tax Code)

Divided ownership can be used to:

• optimize the transfer of wealth
• reduce tax costs
• anticipate inheritance within a secure legal framework
• ensure the protection of a spouse or a third party while preparing the transfer of assets