Current issues

In French law, ownership is divided into several attributes, the main ones being usus, abusus and fructus. Usus is the right to use the property, fructus is the right to collect the fruits of the property and abusus is the right to recover the capital gain when the property is sold. Everyone is familiar with usufruct, which, as its name suggests, combines the right to use the property with the right to collect the fruits. In the case of real property, a usufructuary has rights that are easy to understand: to live in the property and/or collect rent from it.

But some property cannot be used without being consumed. How, for example, would you exercise usufruct rights over a bottle of wine without drinking it? For this type of property, known as consumable property, the Civil Code has created quasi-usufruct: the right to consume property provided that when the usufruct (also called a life estate) ends, the usufructuary gives the bare owner something equivalent. While money is a consumable good and can therefore be the subject of a quasi-usufruct, it is settled case law that subject to certain limits, a quasi-usufruct can be created even over goods that humans have decided are not consumable. Even though this specific issue has not yet been raised before a court and other laws (such as Swiss law) allow for doing so, we take the view that a quasi-usufruct over immovable property is impossible.

Changing a conventional usufruct into a quasi-usufruct is a legal operation that does not transfer rights and is therefore not taxed. A quasi-usufruct is fundamentally the same as a conventional usufruct, it simply gives the usufructuary more extensive rights.

Quasi-usufruct therefore enables a donor to transfer assets while retaining complete control over them. Naturally a number of precautions must be taken, the first being that the quasi-usufructuary and the bare owner must enter into a quasi-usufruct agreement. That agreement will govern their relationship and allow the bare owner’s restitution claim to be liquidated when the time comes.

Bornhauser has been advising on quasi-usufructs for more than 20 years in the context of gifts, ordinary transfers of assets, and life insurance. For example, we obtained an opinion from the advisory committee on the punishment of abuse of law (comité consultatif pour la répression des abus de droit) confirming that a transfer of securities by way of gift with reservation of a quasi-usufruct was not an abuse of law (Opinion 2006-18: BOI 13 L-6-07). That position was subsequently confirmed by the State Council in the same case (10 February 2017, No 387960).