Contact us

Usufructuary right or right of residence?

Usufructuary right or right of residence?

The transfer of a property to descendants, combined with a right of residence or usufructuary right, has far-reaching consequences. What are the most important points of a right of residence and of a usufructuary right?

 

Both types of transfer have the following in common:

 

  • The transfer of ownership must be made against payment or free of charge to the descendants by means of a public deed.
  • It is also possible to encumber only parts of a property.
  • The right of residence or usufruct ends with the death of the beneficiary, unless otherwise agreed.
  • Neither of these are rights to remodel or sell the property.

 

Right of residence

 

  • The beneficiary may live in the property themselves. This right is non-transferable, cannot be inherited or pledged and must be exercised personally.
  • Family members and cohabitants such as cohabiting partners can be admitted.
  • The authorised occupant is responsible for ordinary maintenance and ancillary costs. Extraordinary maintenance, replacement of installations and mortgage interest are paid by the homeowner.
  • The authorised occupant pays tax on the imputed rental value.
  • The owner pays tax on the cadastral value or the official value and can claim the mortgage and mortgage interest for tax purposes.

 

Usufructuary right – additional points in addition to the right of residence

 

  • Beneficiaries may occupy the property themselves, rent it out to third parties without the owner’s consent or entrust a third party with its management.
  • The usufructuary pays the usual maintenance, ancillary costs, insurance and mortgage interest.
  • The usufructuary pays tax on the official value and the imputed rental value or rental income. Maintenance, mortgages and mortgage interest can be deducted from taxable income or assets.

 

 

 

Taxes on the transfer of assets

 

If the right of residence or usufruct is transferred free of charge during your lifetime, this constitutes a gift.

 

Note: It may make sense to agree an interest-free loan for the value of the property instead of a gift. This gives the parents a regular cash inflow and the remaining debt can be converted into a gift at any time.

 

Please note: There is a risk that the increase in assets may result in the descendants having to pay higher contributions to the relatives’ support obligation.