“Usufruct” in property ownership is the right to use and benefit from property without being the owner. It’s like you’re a tenant, but you don’t pay rent.
Thus, property owners and users are different people. The owners of such real estate are called “naked owners”.
Naked property owners are those who own real estate. But they can neither “use” the property, nor “live” in it, nor “lease”, since this right is transferred directly to the “usufructuary”. In fact, the rightful owners cannot have the right to “access” property if the usufruct does not allow them to do so.
“Usufructuaries” are those who have the right to “live”, “rent” and “use” property and even block access to “naked owners” if they so choose.
Let’s try to explain in detail what this legal concept is.
Legal “ownership” of property consists of a group of legal rights, such as:
Basically, usufruct is of two types:
“Temporary” or “Conditional”: when the use of the property is limited in time or conditionally. For life: when an immovable resource is used throughout the user’s life.
Usufruct traces its history to Roman law and is quite common in inheritance and family law in continental European countries such as Spain, Portugal, Germany, France and others.
In the process of inheritance, the testator often transfers the usufruct of a permanent home to the surviving spouse, leaving the rest of the property to the children (the right to bare ownership). Thus, the deceased party guarantees that the surviving spouse will have a place to live, despite possible conflicts with children.
In addition, usufruct is widely used in real estate transactions in Spain to avoid or reduce the Spanish inheritance tax. Frequently, parents buy real estate on behalf of their children, while retaining the right to use it. Thus, if the buyers buy only the usufruct and the children buy the bare property, in the event of the death of their parents, the children will only have to pay an inheritance tax equal to the value of the usufruct, since they are already the owners of the rest.
But this system needs to be scrutinized in detail due to the recent interpretation of the law, as a parent’s decision to transfer bare property to their children can be viewed as a “donation or gift,” and then taxes are paid as a “donation or gift”. And the “gift tax” in Spain can be even higher than the “inheritance tax”. One way to avoid this is to pay the children the price of “bare property” yourself and from your own sources. But due to the fact that this is a very sensitive issue with important tax implications, it is highly recommended that you consult with a lawyer before making such decisions.
More information you may obtain contacting the professionals of of the law firm Despacho Lamas in Palma de Mallorca by +34 971 720 202