We are going through a time that struggles to regain stability and serenity. The COVID-19 pandemic, climate change and its consequences, the resurgence of conflicts (Ukraine, Middle East) on an international scale… All of this legitimately impacts our ways of thinking, our projects, and our lives.
Real estate has always been, and will always be, a safe haven. Real estate refers to property; it is concrete and solid. It is reassuring.
Everyone knows that investing in real estate is a long-term investment, meaning it lasts. This, too, is comforting during times of instability.
Moreover, if not especially, housing is, in the truest sense of the word, a shelter, the first refuge that one desires for oneself and one’s family.
And this protection can be transgenerational. Real estate can be passed down: thus, one can protect their children and grandchildren over time.
Let us take a brief moment to consider a mechanism that allows one to acquire and/or benefit from real estate while optimizing its fiscal transmission:
The division of property.
The division of property involves splitting the full ownership of a real estate asset into two distinct parts: usufruct and bare ownership.
Usufruct grants its holder, the usufructuary, the right to enjoy the real estate asset and receive its income (the rents). The usufructuary also has the right to transfer or lease their usufruct to a third party. However, they cannot sell or mortgage the property.
Bare ownership represents ownership and the right to dispose of the asset at the end of the usufruct period. During this period, the bare owner cannot use the real estate property or receive its income. However, when the usufruct ends, the bare owner regains full ownership of the real estate asset.
For example, a parent can transfer the bare ownership of a residence to their children while retaining the usufruct of that residence. This allows them
- to continue occupying it,
- receiving rents if the residence is leased,
- and maintaining it. The usufructuary must maintain the property and carry out necessary repairs. They are also responsible for property taxes.
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However, upon the death of the usufructuary parent, the bare owner(s) child(ren) becomes the full owner of the residence. This allows for the transmission of wealth to children at a lower cost.
The division can also facilitate the acquisition of a property. One can acquire only the bare ownership of a property to develop a real estate portfolio to pass on while avoiding being liable for the IFI (Impôt sur la Fortune Immobilière).
In conclusion, the division is a wealth management strategy that offers fiscal and succession advantages. It allows for the advantageous distribution of income and expenses among the parties from a tax perspective and facilitates and plans the transmission of real estate wealth.
Beyond the sentimental value of a real estate asset within a family, it serves as a refuge for future generations.