Usufruct is a legal concept in the field of inheritance, especially when it comes to family businesses. If you are about to inherit a business or are in the process of doing so, understanding the different types of usufruct can be very important in making the right decision.
What is usufruct?
Usufruct is a real right that allows its holder, known as the usufructuary, to possess and enjoy another person’s property, as well as the fruits it produces, for a specified time or life. It is important to note that the usufructuary is not the owner of the property, but has the right to use and enjoy it.
In the context of inheritance, usufruct is often used as a way of dividing the rights to inherited property among different beneficiaries.
For example, it is common for usufruct to be granted to the surviving spouse and bare ownership to the children.
Types of usufruct in inheritance
There are several types of usufruct that can be applied in the context of inheritance. Each has its own characteristics and may be more or less appropriate depending on family and business circumstances.
Legal usufruct
Legal usufruct is that which is established by law as mandatory in certain inheritance situations. This type of usufruct does not depend on the will of the testator, but is automatically applied by the provisions of the law.
Application in business inheritances: In the case of family businesses, legal usufruct may affect the distribution of the company’s shares or holdings among the heirs. It is crucial to take this possibility into account when planning business succession.
Voluntary usufruct
Voluntary usufruct is established by agreement between the parties or by testamentary disposition. This type of usufruct offers greater flexibility, as it allows the testator to decide on its constitution and terms.
Application in business inheritances: For business owners, voluntary usufruct can be a valuable tool to ensure that the surviving spouse retains certain rights over the business, while the children or other heirs receive bare ownership.
Life usufruct
Life usufruct extends for the entire life of the usufructuary. This type of usufruct is particularly common in inheritances between spouses.
Application in business inheritances: In the context of a family business, a life interest can ensure that the surviving spouse retains a position in the business and receives benefits from it for the rest of their life.
Temporary usufruct
Unlike life usufruct, temporary usufruct has a limited duration, established at the time of its creation.
Application in business inheritances: This type of usufruct can be useful when you want to grant rights over the company to an heir for a specific period, for example, until another heir reaches a certain age or meets certain conditions.
Universal usufruct
Universal usufruct refers to a situation in which the usufructuary has the right to enjoy all the assets of the estate. This type of usufruct is common in wills between spouses.
Application in business inheritances: In the case of a family business, universal usufruct could grant the surviving spouse the right to enjoy all the benefits of the business, even if ownership passes to the children or other heirs.
Implications of usufruct in business inheritance
When it comes to inheriting shares or holdings in a company, usufruct has specific implications that are important to understand:
- Rights of the usufructuary: According to the Capital Companies Act, the usufructuary of shares or holdings is entitled to receive the dividends agreed by the company during the period of usufruct.
- Rights of the bare owner: The status of partner resides with the bare owner, who generally retains voting rights and other corporate rights, unless the company’s articles of association provide otherwise.
- Business management: It is crucial to clearly establish how the company will be managed when the shares or holdings are subject to usufruct, to avoid conflicts between the usufructuary and the bare owners.
- Succession planning: Usufruct can be a valuable tool for succession planning in family businesses, allowing for a gradual transition of control and profits from the company.
Tax considerations of usufruct in business inheritance
Usufruct has important tax implications that must be taken into account when planning the succession of a business:
- Inheritance and Gift Tax: The valuation of usufruct for this tax depends on the age of the usufructuary, the type of usufruct and the total value of the assets.
- Taxation of dividends: Dividends received by the usufructuary are subject to personal income tax.
- Capital gains: In the event of the sale of shares or holdings, it is important to determine how the capital gains will be distributed between the usufructuary and the bare owner.
Advantages and Disadvantages of Usufruct in Business Inheritance
Usufruct can be a useful tool in business inheritance planning, especially in the context of family businesses. Below is a comparative table summarising its main advantages and disadvantages:
| Aspect | Advantages | Disadvantages |
|---|---|---|
| Distribution of rights | Allows flexible distribution among heirs. | May generate conflicts between usufructuary and bare owners. |
| Generational transition | Facilitates succession in family businesses. | May complicate decision-making if roles are not well defined. |
| Protection for the surviving spouse | Guarantees income without relinquishing family control of the company. | There may be tensions if economic interests are not aligned with strategic interests. |
| Taxation | Can optimise asset distribution with proper planning. | Has tax implications that must be carefully analysed. |
Usufruct is a powerful tool in family business succession planning, but it requires careful consideration of its different types and implications. By understanding the different types of usufruct and their effects on the inheritance of a business, owners can make informed decisions that protect both their loved ones and the future of their business.
If you are considering using usufruct in your business succession planning, it is highly recommended that you seek specialised legal and tax advice. Every business and family situation is unique, and decisions made in this area can have long-term consequences for both the business and the heirs.
Remember that the key to successful business succession is advance planning and clear communication with everyone involved. Used wisely, usufruct can be a valuable tool in ensuring the continuity and success of your business legacy.
