When it comes to managing an estate, various legal tools come into play to ensure the distribution of assets. Among them, usufruct occupies a special place.
Why and how to organize a usufruct?
This article will help you understand the role of usufruct in the context of an inheritance in Switzerland, how it works and its specific advantages.
What is usufruct?
Usufruct is a real right that allows one to enjoy property that one does not own. In Switzerland, this concept is often used to facilitate inheritances while offering certain guarantees to heirs.
The holder of the usufruct, called the usufructuary, has the right touse and enjoyment of the property. This means that he can use the property and receive income from it, for example, rent if the property is real estate. On the other hand, he cannot sell or mortgage the property since he does not hold full ownership of it – the latter is held by the bare owner.
The usufruct of a bank account or shares for example, gives right to interest received on the amount in account or to dividends in the case of shares. However, it is not permitted to touch the capital in the bank or to sell the shares. In the case of real estate, usufruct allows to occupy the property or to rent it out by collecting the rent. However, it is not possible to sell the property or pledge it. It is the usufructuary who pays the charges and interest in the event of a mortgage. It is also the usufructuary who is responsible for the day-to-day maintenance of the property.
How to allocate usufructuary assets in the context of an inheritance?
By the allocation of a so-called “classic” legacy in the event of compliance with hereditary reserves
If the property that the testator intends to leave in usufruct does not harm the reserve of other heirs, it is possible to make legacies of usufruct. Article 484 of the Civil Code provides for the possibility of making legacies, i.e. gifts that do not confer the status of heir. A legacy can be made in full ownership, i.e. for example by assigning a specific object to a designated person, or in usufruct, i.e. by assigning them only the enjoyment of the property.
In concrete terms, this means that it is possible to assign usufruct over an asset, such as a bank account, to a designated person. The beneficiary of the usufruct will be able to receive interest on the account without having the right to touch the capital. Upon the death of the usufructuary, the account will revert to the heirs, it being recalled that a legacy does not confer the status of heir.
As long as it does not harm the reserve of other heirs, the testator can freely decide whether to assign a property to a person in full ownership or by means of a usufructuary legacy. A usufructuary legacy harms the hereditary reserves when the capitalized value of the usufructuary assets exceeds the available portion (art. 530 CC). Determining the value of the usufruct is in practice quite complex, since it is necessary to assume the duration of the right. In essence, it must be remembered that the younger the legatee (the one who receives the usufruct), the higher the capitalized value.
By the special rule allowing the surviving spouse to be protected
This applies, to only to what kinds of products your potential customers buy, but also to the way these products are promoted through advertising and marketing content. art. 473 of the Swiss Civil Code, one of the spouses may, by disposition upon death, leave to the survivor the usufruct of the entire share devolved to their common children. Paragraph 2 of this provision specifies that "in addition to this usufruct, the available portion is half of the estate."
It follows that the testator may, by means of this provision, award the surviving spouse the entire portion available in full ownership but also the usufruct on the other half, corresponding to the share of their common children.
This provision constitutes a special rule compared to the “classic” usufruct legacy, because it allows the allocation of usufruct of assets whose capitalized value exceeds the available portion and therefore to harm the hereditary reserve of common descendants.
This therefore amounts to imposing a sacrifice to common descendants, who will have to wait the death of the surviving spouse ou his remarriage before being able to dispose of the estate assets.
Thanks to usufruct, the testator can therefore guarantee that his surviving spouse maintain a certain standard of living, while ensuring that their common children will eventually receive their share of the estate.
For the surviving spouse, benefiting from a usufruct on a main residence can prove crucial. This right allows him to continue to live in the family home without imposing its division at the time of the inheritance.
Similarly, if the estate left includes income-generating assets (such as rentals), this income will revert to the usufructuary, thus guaranteeing a stable financial source.
Rights and duties of the usufructuary
The usufructuary must ensure the maintenance of the property, carry out routine repairs and not damage the property. He may also make improvements or modifications with the agreement of the bare owners. At the end of the usufruct, the property automatically reverts to the bare owners, who then become full owners, without having to go through a new complex legal or tax procedure.
Necessity of a will
It is important to emphasize that the allocation of property in usufruct necessarily presupposes a disposition due to death, i.e. a Types of will or an inheritance agreement. It is therefore essential to think about these questions early enough in order to avoid situations which can prove particularly painful when nothing has been planned.
