Usufruct & Bare Ownership in France (Démembrement) Explained

What usufruct (usufruit) and bare ownership (nue-propriété) are

Dismemberment of ownership (démembrement de propriété) means splitting the full ownership of an asset into two separate real rights held by two different people: the usufruct (usufruit) and the bare ownership (nue-propriété). The usufructuary has the use and the income of the asset for a period — usually for life — while the bare owner holds the underlying title and recovers full ownership when the usufruct comes to an end. It is one of the most useful tools in French estate planning, and for a foreign owner of French property it is also one of the least intuitive, because it separates who enjoys an asset from who ultimately owns it.

The usufruct is "the right to enjoy things of which another has the ownership, in the same way as the owner himself, but on condition of preserving their substance" (Article 578 of the Civil Code). In practice the usufructuary has the usus — the right to use the asset, to live in a house or to occupy it — and the fructus, the right to take the income it produces, whether that is rent from a let property, interest from bonds, or dividends from shares (Article 582 of the Civil Code). What the usufructuary does not have is the right to dispose of the asset itself: outside the special case of a quasi-usufruct, the usufructuary cannot sell the thing over which the usufruct runs. The usufruct is nonetheless a genuine patrimonial right that forms part of the usufructuary's estate and can itself be sold, given or seized independently of the bare ownership (Article 595 of the Civil Code).

The bare owner (nu-propriétaire) holds the remaining attribute — the abusus, the right to dispose of the asset — and takes back full ownership the moment the usufruct ends (Article 578 of the Civil Code). During the usufruct the bare owner has the title but not the use or the income, which is why bare ownership is worth less than full ownership while the usufruct is running. The two rights are not held in undivided shares (indivision): the usufructuary and the bare owner exercise concurrent rights of a different nature over the same asset rather than shares of the same right (Cass. civ. 3e ch. 7 July 1993, no. 92-19193; Cass. civ. 1re ch. 12 February 2020, no. 18-22537). Neither can force a division on the other, but the sale of the asset itself requires both of them to agree.

Who pays for what during the usufruct

Because two people share one asset, French law allocates the burdens between them. The usufructuary is bound only to the ordinary maintenance repairs (Article 605 of the Civil Code); the major structural repairs defined by Article 606 fall on the bare owner, unless they became necessary because the usufructuary failed to keep the asset up. The usufructuary must return the asset in the state it was in when the usufruct opened, cannot change its intended use, and can claim no indemnity for improvements that benefit the bare owner (Article 599 of the Civil Code). Where the usufruct runs over shares or company units, the usufructuary generally takes the income and the vote on the distribution of profits while the bare owner is treated as the shareholder — an allocation that matters a great deal when a dismemberment is used to pass on a family business.

How each side is valued (the Article 669 scale)

For tax, the value of the usufruct and the value of the bare ownership are not negotiated — they are read off a fixed scale. Article 669 I of the General Tax Code fixes the value of a life usufruct as a percentage of the full ownership according to the age of the usufructuary, and the bare ownership is simply the remainder. The younger the usufructuary, the more the usufruct is worth, because it is expected to last longer; the older the usufructuary, the more the bare ownership is worth, because full ownership will reunite sooner. The two halves always add up to 100%.

The scale is what makes dismemberment work. Take a property worth €1,000,000 and a usufructuary aged 62. The usufruct is valued at €1,000,000 × 40% = €400,000, and the bare ownership at €600,000 (Article 669 I of the General Tax Code). If instead the usufructuary were 45, the usufruct would be worth 60% and the bare ownership only 40%; at 85 the usufruct would be worth 20% and the bare ownership 80%. The bands move in ten-year steps, and it is the usufructuary's age at the moment the dismemberment is created — the gift, the death, the sale — that fixes the figures.

Two points regularly trip up foreign owners. First, this administrative scale is a fiscal fiction. Re-valued on 1 January 2004, it rests on the 1996-1998 INSEE mortality tables and a 3% discount rate, and it can differ significantly from the economic value a usufruct would command in a genuine negotiation or a civil partition. The economic value of a life usufruct — the discounted stream of income it is expected to produce — is often higher for a younger usufructuary than the tax scale suggests. Second, the fact that an asset is dismembered does not, by itself, earn any discount. The Cour de cassation and the tax authorities agree that no abatement can be applied on account of the dismemberment when a dismembered asset is valued for gift or inheritance duty (Cass. com. 20 October 2007, no. 05-16751): each right is valued at its scale figure, and the two figures add back to the full value.

The Article 669 scale is used almost everywhere a usufruct has to be valued for tax: gift and inheritance duty on dismembered assets, registration duty on the sale of a usufruct or a bare ownership, the conversion of a usufruct into an annuity, and the separate valuation of dismembered rights for the wealth tax on real estate (impôt sur la fortune immobilière, IFI). The tool below reads the split straight off the scale for any age.

Why démembrement saves inheritance tax

Dismemberment saves tax because of what happens when the usufruct ends. When a life usufruct falls in — almost always on the death of the usufructuary — the bare owner recovers full ownership of the asset without any transfer duty on the usufruct that disappears (Article 1133 of the General Tax Code). The bare owner does not "inherit" the usufruct; the two rights simply reunite by operation of law, and French tax law treats that reunion as tax-free. This single rule is the engine behind most lifetime estate planning in France.

Put the scale and the tax-free reunion together and the strategy becomes clear. If a parent gives a child the bare ownership of an asset now and keeps the usufruct for life, the gift is taxed only on the bare-ownership value under the Article 669 scale — a fraction of the full value. The parent keeps the use and the income for the rest of their life. Then, on the parent's death, the child's bare ownership swells into full ownership automatically, and no inheritance tax is due on that increase (Article 1133 of the General Tax Code). The value that the usufruct represented — 40%, 50%, even 60% of the asset depending on the parent's age at the gift — passes to the child having never been taxed at all.

The contrast with an outright gift or an inheritance of full ownership is stark. Give a child a €600,000 property outright and the gift is taxed on €600,000 (after allowances). Give the child the bare ownership while the parent is, say, 65 and keeps the usufruct, and the taxable base is only 60% of the value — €360,000 — because at 61 to 70 the bare ownership is worth 60% under the Article 669 scale. The remaining €240,000 of value, represented by the usufruct, is never taxed: it evaporates tax-free when the parent dies and the ownership reunites. The earlier the parent acts, and the younger they are, the smaller the taxable bare-ownership slice and the larger the value that ultimately escapes tax.

The same logic on the surviving spouse's death

The tax-free reunion also explains why a surviving spouse's life usufruct is so efficient for the family. Where a spouse takes the usufruct of the whole estate and the children take the bare ownership, the children are taxed at the death of the first parent only on the bare-ownership value; when the surviving spouse later dies and the usufruct falls in, the children recover full ownership free of inheritance tax (Article 1133 of the General Tax Code). The children pay tax once, on a reduced base, rather than twice on the full value. It is the reason the option for the usufruct of the whole estate is, in most families, the most economical outcome for the children as well as the most protective for the survivor.

Gifting bare ownership with a reserved usufruct

The most common form of lifetime dismemberment is the gift of bare ownership with a reserved usufruct (donation de la nue-propriété avec réserve d'usufruit). The donor gives the children the bare ownership of an asset but keeps the usufruct, which lets the donor retain the income of the asset until death (Article 669 I of the General Tax Code applies to value what is given). A father gives his son the bare ownership of a property and reserves the usufruct; the son becomes full owner at his father's death, and only the bare-ownership value was ever taxed.

What makes the reserved-usufruct gift so effective is the combination of a reduced taxable base and the tax-free reunion. Only the bare-ownership value is subject to gift duty, and that value is calculated from the Article 669 scale by reference to the donor's age at the date of the gift. Because the usufruct is reserved rather than given, it never passes through the tax system: on the donor's death it simply extinguishes, and the child's bare ownership becomes full ownership free of transfer duty (Article 1133 of the General Tax Code). The gift can also be structured to keep control in the donor's hands — for example by a clause forbidding the child from selling the bare ownership without the donor's consent for a period that can run to the end of the usufruct.

The usufruct reserved on a gift can take several forms. It can be a simple usufruct resting on one person's head — a parent gives a child the bare ownership and keeps the usufruct alone. It can be a joint usufruct (usufruit conjoint) shared between two people, which is what happens when both parents keep the usufruct of an asset whose bare ownership they give to their children, so that the survivor continues to enjoy the whole until the second death. It is also possible to stipulate that the usufruct will pass to the surviving spouse (a reversion of usufruct), so that the children only recover full ownership on the second death.

The Article 751 trap: dismembering too close to death

There is one anti-avoidance rule a foreign owner must plan around. Under Article 751 of the General Tax Code, where an asset belonged to the deceased for the usufruct and to one of their presumptive heirs for the bare ownership, the asset is presumed, for inheritance tax, to have belonged to the deceased in full ownership and is taxed in the heir's estate accordingly. In other words, if a parent holds the usufruct and a child holds the bare ownership at the parent's death, the tax office can treat the whole asset as passing by inheritance — wiping out the benefit of the dismemberment — unless the dismemberment can be shown to be genuine.

The presumption does not apply where the dismemberment results from a proper, registered gift of the bare ownership made more than three months before the death, whether an ordinary gift or a shared gift (donation-partage). Registering such a gift gives it the standing of a genuine gift for the purposes of Article 751. The presumption can also be rebutted by proof that money was given, by an instrument bearing a certain date, more than three months before the death to finance the child's purchase of the bare ownership, provided the source of the funds is stated (Article 751, paragraph 2, of the General Tax Code). The courts have accepted, for example, that a sudden and unexpected death while the usufructuary was in good health at the date of the gift can rebut the presumption (Cass. com. 17 January 2012, no. 10-27185). Where the presumption does apply and duty has already been paid on the gift, a claim to restitution of that gift duty runs until 31 December of the second year following the final decision that Article 751 applies (Cass. com. 14 October 2020, no. 18-17880). The practical lesson is blunt: a reserved-usufruct gift must be made by a registered deed and well before death — three months is the statutory line, but earlier is always safer.

Temporary usufruct gifts

Instead of keeping the usufruct and giving away the bare ownership, a donor can do the reverse for a fixed period: keep the bare ownership and give only the usufruct for a set number of years. This is the temporary usufruct gift (donation temporaire d'usufruit), and it lets the donor part with the income of an asset for a defined time — five years, eight years, ten years — while keeping the title and recovering full enjoyment automatically at the end of the term, with no formality required.

A fixed-term usufruct is valued differently from a life usufruct. Under Article 669 II of the General Tax Code, the value of a usufruct granted for a fixed period is 23% of the full-ownership value for each ten-year period of its duration, without fractioning and regardless of the usufructuary's age. So a usufruct given for nine years over a property worth €200,000 is valued at 23% — €46,000 — and gift duty is calculated on that figure; a usufruct given for a period of more than ten but up to twenty years is valued at 46% (2 × 23%). The value produced by this rule can never exceed the value the same usufruct would have as a life usufruct on the Article 669 I scale — so a thirty-year usufruct granted to a person aged 52, which would notionally be 69% (3 × 23%), is capped at the 50% life value for that age.

The temporary usufruct gift has two main uses. The first is to help a relative for a defined period while preserving the family's capital: a parent who owns an income-producing asset — a let property or a portfolio of income-bearing securities — can give the usufruct to a child for a few years so the child receives the income directly, for instance to fund studies or housing, and then recovers the asset in full at the end of the term. The gift attracts gift duty on the usufruct value, but it enjoys the ordinary gift allowances, so where the usufruct value stays within the allowance for the relationship — €100,000 between a parent and a child — no duty is actually payable. For an eight-year usufruct, that allowance covers a full-ownership value of over €434,000, because €100,000 is roughly 23% of that figure.

The second use is to reduce the donor's exposure to the wealth tax on real estate. Because a dismembered asset must in principle be declared by the usufructuary at its full-ownership value (Article 968 of the General Tax Code), a donor who is liable to the IFI and who gives away the usufruct of a property for a period removes that asset from their own IFI base for the duration; the child, if the added value does not push them over the €1,300,000 threshold, may pay no IFI on it at all. Two cautions apply. A temporary usufruct given to a spouse, a civil partner or a cohabitant produces no IFI saving, because those couples are taxed together for the IFI. And the operation must stay within the boundaries the tax authorities have set: a temporary usufruct gift that is fictitious, or whose main purpose is to avoid the IFI, exposes the donor to the abuse-of-law procedure — as, for example, where the donor quietly continues to take the income.

Usufruct and the surviving spouse

The most important dismemberment in French inheritance law arises automatically, without any planning: the surviving spouse's legal usufruct. A surviving spouse who is not divorced is an heir (Article 732 of the Civil Code), and where the deceased leaves children who are all issue of both spouses, the survivor chooses, personally, between the usufruct of the whole of the existing estate and the full ownership of one quarter (Article 757 of the Civil Code). Where the spouse opts for the usufruct, the survivor takes the usufruct of all the existing assets and the descendants take the bare ownership of those same assets.

The choice is a personal right, and it can be made at any time up to the division of the estate. But the other heirs can force the point: they may invite the spouse to elect in writing, and if the spouse has not chosen within three months, the survivor is deemed to have opted for the usufruct (Article 758-3 of the Civil Code). The same default applies if the spouse dies without having chosen (Article 758-4). In practice the usufruct of the whole estate is usually the most advantageous option for the survivor, because it keeps the use and income of every asset in the family home and the family portfolio for life; correspondingly, the children are kept out of the enjoyment of their inheritance until the survivor's death.

The usufruct gives the survivor the right to use the assets and take their income, but not to dispose of them — with one crucial exception. Over cash and other fungibles, the survivor holds a quasi-usufruct (Article 587 of the Civil Code): the survivor can freely use the funds, subject to a duty to restore an equivalent sum when the usufruct ends. This restitution debt is owed by the survivor's estate to the bare owners and is deductible from the taxable value of that estate, which is a further planning benefit — but it has to be properly documented to be allowed. The descendants may, under the general rules, require an inventory of the movables and a schedule of the immovables subject to the usufruct (Article 600 of the Civil Code), and unless the deceased directed otherwise the usufructuary must give security (Article 601).

For tax the arrangement is highly efficient. The surviving spouse is exempt from inheritance tax altogether, so the choice between usufruct and a quarter is tax-neutral for the survivor. For the children it is the usufruct option that is the most economical: they are taxed at the first death only on the bare-ownership value, calculated on the Article 669 scale by the survivor's age, and when the survivor later dies the extinction of the life usufruct lets them recover full ownership free of duty (Article 1133 of the General Tax Code). The children thus pay inheritance tax once, on a reduced base, and never on the usufruct.

Dismembering an assurance-vie beneficiary clause

The same logic can be built into a life-insurance policy (assurance-vie) by dismembering the beneficiary clause. Instead of naming a single beneficiary, the policyholder names one beneficiary for the usufruct — typically the surviving spouse — and one or more beneficiaries for the bare ownership — typically the children. On the insured's death the capital is not paid outright to one person; it is split, so the surviving spouse enjoys the sum during their life and the children take it in full when the survivor dies. This lets the same money serve two generations: income for the survivor now, and the capital for the children later.

Where the death benefit is a sum of money, the usufruct over it is a quasi-usufruct (Article 587 of the Civil Code). The quasi-usufructuary — the surviving spouse — can spend the capital freely, without the bare owner's consent, but on the extinction of the usufruct the survivor's estate owes the bare owners an equivalent sum. The bare owners therefore hold a restitution claim (créance de restitution) against the survivor's estate, in principle equal to the capital the usufructuary received (Article 587 of the Civil Code). That claim matters twice: the bare owners must be able to prove its reality and amount, and, properly established, it is deductible from the taxable value of the survivor's estate — so the same sum is not taxed again on the second death. If the parties want to protect the bare owners more tightly, the clause can exclude the quasi-usufruct, direct the capital into a dismembered account, or impose an obligation to reinvest and a guarantee for the restitution debt.

The tax treatment follows the dismemberment through. The usufructuary and the bare owners are each treated as beneficiaries in proportion to their respective rights, valued on the Article 669 scale by the age of the usufructuary (Article 990 I of the General Tax Code). Where the usufructuary is the surviving spouse or a civil partner, that person is exempt from the levy, and the bare owners are taxed on their share by reference to the scale, with the death-benefit allowances apportioned between them. And, once again, the reunion of usufruct and bare ownership on the usufructuary's death takes place free of inheritance tax (Article 1133 of the General Tax Code) — the children recover the full capital, taxed only on the bare-ownership share, and never on the usufruct.

Frequently asked questions about usufruct and bare ownership in France

What is usufruit in France?

Usufruit is the right to use an asset and take its income while someone else — the bare owner — holds the title. French law defines it as "the right to enjoy things of which another has the ownership, in the same way as the owner himself, but on condition of preserving their substance" (Article 578 of the Civil Code). The usufructuary can occupy a property or take its rent, interest or dividends (Article 582), but cannot sell the asset itself; that right belongs to the bare owner, who recovers full ownership when the usufruct ends.

How is usufruct valued?

For tax, a life usufruct is valued on a fixed scale set by the age of the usufructuary (Article 669 I of the General Tax Code). The usufruct is worth 90% of the asset up to age 20, falling by ten points every decade to 40% at 61 to 70, 30% at 71 to 80, and 10% from 91; the bare ownership is the remainder. A usufruct granted for a fixed term instead is valued at 23% of the asset for each ten-year period (Article 669 II).

Does gifting bare ownership reduce inheritance tax?

Yes. If you give your children the bare ownership of an asset now and keep the usufruct for life, the gift is taxed only on the bare-ownership value under the Article 669 scale — a fraction of the full value — and you keep the income for life. On your death the usufruct extinguishes and your children recover full ownership with no inheritance tax on the reunion (Article 1133 of the General Tax Code). The usufruct value is therefore never taxed. The gift must be made by a registered deed more than three months before death to avoid the Article 751 presumption.

What is a quasi-usufruct?

A quasi-usufruct is a usufruct over things that are consumed by use — above all money. The quasi-usufructuary has all three attributes of ownership, including the power to spend the funds freely, but must restore an equivalent sum when the usufruct ends (Article 587 of the Civil Code). The bare owner holds a restitution claim against the quasi-usufructuary's estate, which is deductible from that estate for inheritance tax if it is properly documented. A surviving spouse holding the usufruct of cash, or the usufruct of a life-insurance death benefit, is typically a quasi-usufructuary.

What happens to the usufruct on death?

A life usufruct extinguishes on the death of the usufructuary, and the bare owner recovers full ownership automatically and free of inheritance tax on the usufruct that falls away (Article 1133 of the General Tax Code). The bare owner is not treated as inheriting the usufruct; the two rights simply reunite. This tax-free reunion is why dismemberment is so widely used: the value the usufruct represented passes to the bare owner having never been taxed.

Is a dismembered asset given a discount for the split?

No. Although a dismembered asset can only be sold with both the usufructuary and the bare owner agreeing, no abatement is allowed for the dismemberment when the asset is valued for gift or inheritance duty (Cass. com. 20 October 2007, no. 05-16751). Each right is valued at its Article 669 figure, and the two figures add back to the full value of the asset.

Can a surviving spouse spend money held in usufruct?

Yes, where the usufruct is over cash it is a quasi-usufruct and the surviving spouse can use the funds freely, subject to restoring an equivalent sum to the bare owners when the usufruct ends (Article 587 of the Civil Code). Over a property the spouse has only the use and the income and cannot sell it without the bare owners. The spouse's legal usufruct of the whole estate arises where they opt for it in a family with common children (Article 757).

How our French lawyers help with usufruct and bare ownership

Dismemberment is powerful precisely because it is technical: the age at which you act changes the tax, the three-month line under Article 751 can undo a badly timed gift, and a quasi-usufruct over cash or a life-insurance benefit needs the restitution debt documented before it can be deducted. We advise owners, spouses and heirs on whether a reserved-usufruct gift, a temporary usufruct, a spouse's usufruct election, or a dismembered assurance-vie clause is the right tool for their family and their French assets — and we make sure the deed is drawn and timed so the tax saving actually holds.

This article is for general information only. It does not constitute legal advice and does not create a lawyer-client relationship. How usufruct, bare ownership and the tax rules apply depends on the family, the assets, their location, their value and the timing of any deed. Contact our French lawyers for advice on your situation before acting.