Can we annul usufruit before selling a house in France?

Reader Question: I entered into an arrangement with my son for me to own the usufruit on my house and him the nue-propriété. We are thinking of selling – can you advise on formalities to annul this ‘donation’? We paid up-front taxes when the ‘donation’ was made. Will these be refunded?

Splitting ownership of a French property into usufruit (effectively a life interest) and nue-propriété (the reversionary interest) is relatively common in French estate planning, provided owners are resident in the house, or at least in France. 

By retaining a life interest, owners can remain living there. When they die, whoever owns the reversionary interest becomes absolute owner. There is no inheritance tax: if any tax was due, it would have been paid at the time the original gift of the nue-propriété was made. The value of the nue-propriété will always be lower than the whole property, as the usufruit itself has a value. 

Usufruits are permanent

Once a gift is made, it is not possible to have the deed set aside or annulled. The gift will have been completed by a notaire, and the ownership format registered at the local land registry. The parent (the ‘donor’) will be noted as holding the usufruit, and the son registered as nue-propriétaire. Any taxes paid will not be refunded, nor notaire’s fees (about 3% of the value) reimbursed. 

You seemingly have two options: either to replicate the same format in the new property ownership or for the son to gift back the nue-propriété before a sale takes place. 

The former is likely to be preferable. The seller pays no legal fees to the notaire on a sale, but the gift back would attract fees. 

And if the son has children who are minors, they would not have requisite capacity to confirm acceptance of the gift back – required since it would directly affect what they stand to inherit in future. Using the courts to resolve this can be extremely costly, and there is no guarantee an authorisation would be forthcoming.

This reader question was answered by Matthew Cameron of Ashtons Legal

Related links:

When are property sales in France free from capital gains tax?

How to work out if you owe French property wealth tax in 2022

Six ways to reduce your French inheritance tax