Usufruct is, in a short easy to understand sentence, a legal right in Spain for someone to live in a house until their death. It has its origin in Roman law, coming from the Latin usus and fructus, meaning the use of, or enjoyment to any fruit (profit or yield) Thanks to Eva in Spanish Solutions for the explanation!!
In real terms, it consists of using and enjoying the property of others (the fruit!). The owner of this Usufructo holds possession of the property, lives in it, uses it but cannot fully dispose of the property. They are prohibited by law to transmit, alter, encumber it, nor decrease the property value. After all it is owned by a third party.Usufruct, while it is valid, temporarily splits or shares the rights inherent to the private ownership.
The usufructuary (person who is named on the deeds of the property with the right to live there) is entitled to use the property. In some cases they get the yield and the income obtained from renting the property.
The bare owner (investor or person who inherited the home) retains the right to dispose of the home, but is not able to use it, live there or receive the profit that might generate if rented. Only at the very end of the usufruct (usually the death of the usufructuary) the bare owner will acquire full ownership of the property.
This is all above board and becoming quite common. Its regulated by Spanish law in Chapter 1 of Title 6 of the Civil Code (Article 467-522). Usufruct may be total / partial depending on whether it affects the whole good or part of it. Also, it can be temporary or much more commonly for a lifetime. The constitution of the deal may be legal if it is imposed by law or voluntary if it arises from a party choice like a private contract or an equity release.
Universal usufruct in favour of the spouse
Picture a foreign couple who own a property in Spain. In their respective wills, both agree children will inherit the “bare ownership” of their half of the home and the partner will receive the lifetime usufruct. Therefore, upon the death of one of them, the children would inherit 50% of the property. It’s important the heirs understand here that they would not be able to use it, rent it, live there because the surviving parent will now have 50% of the ownership and also the exclusive right to use and enjoy the other 50% too during their lifetime.
The usufructuary will have in this case the exclusive right to use the property until his/her death. They can generally rent it and collect the rents. Interestingly, they can dispose of their usufruct rights, by leasing, transferring or charging it while it is valid.
Usofructo has a real value: This is an asset we are talking about with a real financial value. The basic formula to work out this value is easy according to our accountant. The valuation of a lifetime usufruct is equal to 70% of the total value of the freehold property, if the beneficial owner is under 20 years old. It decreases in value by 1% for every year over the age of 20 the person is, with a minimum value of 10%. The maximum worth is 70%.
The simple formula to calculate the % of the overall value, as it relates to the lifetime usufruct is to start with the number 89 and subtract the age of the usufructuary. Let’s say your home in Spain is worth 100,000 euro.
The age of the usufructuary 59 years old. (89-59 = 30) 30% of 100,000 is 30,000 so the value of the usufruct will be 30k. The value of the bare ownership, the actual property ownership will be the remaining 70%, i.e. 70,000 euro.
According to Marie Carmen our Spanish tax consultant, many of the spouses inheriting the lifetime usufruct will pay little or nothing due to allowances and deductions that now are also applicable to non-residents in Spain. This may or may not apply to Britons after Brexit. Similarly children inheriting the bare ownership that live in the EU can pay as little as zero in tax currently! Please check with your accountant as all cases vary. (Donation and inheritance tax laws are set to change in Spain, please seek professional advice)
The main obligation of the usufructuary is to maintain the property and meet the payment of IBI or Town Hall rates. They are responsible for the ordinary expenses of the Community of Owners, maintenance costs and utilities.
The (bare) owners of the home have the obligation to deliver the property to the usufructuary and allow them peaceful enjoyment of it. They must pay the relevant taxes on the property and cover the costs of any extraordinary repairs. They are entitled to receive the property back upon expiration of the lifetime usufruct- this is what makes it attractive to investors. The death of the usufructuary or the loss of the asset, cause the end of the lifetime usufruct right.
Commutation
Commutation is a clause which allows the usufructuary to benefit in other ways from owning this asset. For example- they can reach an agreement with the bare owner saying that they might prefer to receive an annuity or an amount of money to compensate for their right of usufruct. In some cases, they would allow the bare owner to unify the full ownership of the home before their death. (for a cash compensation)
It is quite common, in our experience among foreigners when signing their Spanish Wills to leave the assets they have in Spain first to the spouse and then to their children. This is slightly different for Spanish citizens, but please speak to our lawyers directly for clarification on this. The legítima, for Spaniards, is the legal obligation to leave certain rights and inheritance to the children, parents or spouse.
If you think this is something you want to explore- Please get in touch with Spanish Solutions and we’ll break down the costs and obligations for you.
We think it is an excellent way for people to enjoy full time their Spanish property yet transfer ownership to a child or indeed investor!
Ian Comaskey
24 Comments
Anja Larrard
Sehr geehrte Damen und Herren
Mein Ehemann und ich haben 2 Testamente. Wenn ein Partner stirbt geht die 50% an den anderen Partner. Wenn wir beide verstorben sind, geht das Erbe an die Töchter meines Ehemannes.
Mein Ehemann hat sein Testament ändern lassen. Wenn mein Ehemann verstirbt, gehen seine 50%sofort an seine Töchter.
Es hat mit einer unschöne Geschichte seitens einer seiner Töchter zu tun gehabt, dass er sein Testament geändert hat.
Mein Ehemann bereut es jetzt, dass er sein Testament geändert hat.
Jetzt möchte mein Ehemann das lebenslange Usu Fruct geben.
Unser gemeinsames Haus hat einen Wert von +- 80.000 Euro, dieses wurde uns schon mitgeteilt.
Mein Ehemann ist britischer Staatsbürger und ich deutsche Staatsbürgerin. Mein Ehemann lebt in England und ich lebe in unserem Haus in Spanien für immer und seit Ende April 2014.
Nun ist unsere Frage, was für Kosten auf uns zukommen, wenn er mir das Usu Fruct durch einen Notar geben würde?
In voller Hoffnung auf eine Antwort von Ihnen
Mit freundlichen Grüßen
Anja Larrard und Peter Stanley Larrard