Friday, March 16, 2018
A Usufruct is a legal right which someone, who is not the owner, is given to use and enjoy the profits and advantages of something belonging to another as long as the asset (property) is not damaged or altered in any way, for a certain period of time. At the end of this period, the property must be handed back to the person who owns it.
One of the most common types of usufruct is a life interest which someone acquires in terms of a will. It gives the usufructuary the right to use and enjoy specific assets of the estate for the term stipulated by the testator in the will.
An example is where a husband bequeaths a residential property to his children in his will, but stipulates that his wife must/may enjoy usufruct until the day she passes away. In this way he ensures that his wife has the use and enjoyment of the property.
The 'rights' of the usufructuary could create problems for, let us say, the children in our example, (the ultimate heirs), because whilst the usufruct is in effect, the children have no right and authority with regard to the use or enjoyment of the property. Although it was bequeathed to them, it is subject to the property, although they naturally have the right to protect their interests should the usufructuary misuse the property.
Maintenance or repairs and insurance premiums will be for the heirs' (the children's) account, and they are obliged to ensure that the property is in a habitable condition at all times. This may also cause financial strain for the heirs, as there is often not enough money available to finance such repairs. It is extremely important that the testator (the husband) who bequeaths the usufruct should make financial provision for the maintenance of the usufruct asset. Otherwise he could put an unnecessary burden on the heirs or even cause them financial problems. A life policy is a very cost-effective way of doing this.
The usufruct lapses when the usufructuary passes away. If the heirs die before the usufructuary, their share of the usufruct is transferred to the heirs, but remain subject to the existing usufruct.
When using a usufruct in your will it is important to be aware of all the tax implications for all the parties concerned. Please consult a tax adviser or Licensed Financial Services Provided with regards to capital gains tax and estate duty and the impact it will have on all parties.