Surviving Spouse: Know Your Rights
– Lifetime usufruct: legal principles
– Application for conversion of the usufruct into a life annuity
– Lifetime usufruct and surviving spouse: the need for an agreement with bare owners
– Effects of conversion of usufruct into a life annuity
– Lifetime usufruct: the tax regime of the transmission
In the event of the death of a married person, the surviving spouse may find himself or herself the owner of the usufruct of the deceased’s property. Whether it results from the law, a will or a donation of future property, this usufruct can also be transformed into a life annuity. We tell you more.
Good to know: the usufructuary can use the property and receive the income from it, but he/she cannot dispose of it (for example, he/she cannot sell it); conversely, the bare owners of the property have the right to dispose of it but not to use it or receive the income from it.
Lifetime usufruct: legal principles
In the case of liquid assets in the estate (bank accounts), the surviving usufructuary spouse has a quasi-usufruct right over the sums: this means that he or she can use them as he or she pleases, on condition that he or she or his or her heirs return them at the end of the usufruct. However, the law provides for certain guarantees for the benefit of bare owners.
In the context of succession, the spouse of the deceased may benefit from the usufruct of the property in two ways:
– either when he or she chooses to opt for the usufruct as part of his or her legal rights (when the deceased leaves only children from both spouses);
– or when the surviving spouse benefits from a gift between spouses (donation to the last living person or will) granting him/her usufruct rights.
Impact of the matrimonial regime
Before proceeding with the liquidation of the estate, it is essential to consider the impact of the matrimonial regime. Regardless of the marital property regime, the spouse is always presumed to have free disposal of the funds deposited in his or her accounts vis-à-vis the bank.
As regards the ownership of sums held in the bank, the rule is somewhat different:
– If the spouses were married under a community regime, with or without a marriage contract, all sums or values whose origin cannot be proven are presumed to be joint property; similarly, if the sums come from the spouses’ salaries or retirement pensions or income from their property, they are shared. Under the community regime, each of the spouses, or his or her estate, is entitled to half of the common property.
– If the spouses were married under the universal community of property with an entire attribution clause, all the common property goes to the surviving spouse as a spousal benefit.
– If the spouses were married under the regime of separation of property or the regime of participation in acquests, each retains ownership of his or her personal property; however, sums deposited in joint accounts are presumed to be in shared ownership between the spouses.
Good to know: concerning the regime of participation in acquests, the financially weak spouse will be able to claim half of the acquests of his or her spouse.
Rights and obligations of the spouse in respect of the estate
When the estate includes cash kept at the deceased’s home or in a safe, the surviving spouse’s usufruct is exercised over it in the form of a quasi-usufruct. In concrete terms, this means that the surviving spouse becomes the owner and can dispose of them as he or she pleases, but must return them at the end of the usufruct.
As regards accounts opened in the name of the deceased alone, death leads to the closure of the account.
– When the account’s balance is positive, the bank owes a debt to the estate, which is immediately payable. The spouse’s usufruct is then exercised in the form of a quasi-usufruct.
– If it is a joint account, the sums are presumed to belong indivisibly to each of the spouses, and in this case, the death does not lead to the closure of the account—the spouse benefits from a quasi-usufruct on the sums.
As for savings, the death of the account holder leads to the closure of regulated savings accounts. The surviving spouse also has a right to quasi-usufruct on the sums.
Securities accounts containing sums of money on the day of death, whether from securities income, capital gains on disposal or aggregates awaiting reinvestment, benefit the spouse under his or her right of quasi-usufruct. Constant case law regularly notes that the securities portfolio constitutes a “universality”: the spouse has the right to receive the income from the securities but not any capital gains resulting from their sale. He or she is also entitled to sell the securities provided that other securities replace them.
Advice: in the case of securities portfolios, it may be preferable to organise the rights and obligations of the usufructuary and bare owners through a specific agreement; the notary may also advise his clients to transfer the portfolio to a civil company, with the dismemberment being transferred to the shares.
Obligations of the usufructuary and protection of bare owners
The quasi-usufruct allows the usufructuary to become the owner of the sums and to enjoy them freely, on the sole condition that he returns them to the bare owners at the end of the usufruct. The estate bears the restitution debt. The bare owners risk not being reimbursed if there are not enough assets in the usufructuary’s estate. The law, thus, provides for a protective regime for bare owners:
– an inventory must be drawn up before the usufructuary takes possession, making it possible to establish the consistency and value of the property subject to the usufruct;
– the usufructuary must provide security to the bare owners;
– The bare owner heirs have the right to request the conversion of the usufruct into a life annuity; the surviving spouse has the same right.
Application for conversion of the usufruct into a life annuity
A request to convert the usufruct into a life annuity may be made by the surviving spouse who is the usufructuary, or by all the bare owners, or by one of them.
The deceased is not entitled to deprive his heirs of the right to request conversion. Moreover, those who have the right to request conversion cannot waive their right in advance. They cannot be required to waive their right.
Please note: the application for converting the usufruct into a life annuity must be made before the succession is divided.
Lifetime usufruct and surviving spouse: the need for an agreement with bare owners
The progress of the procedure depends on the agreement between the surviving spouse usufructuary and bare owners. Suppose the surviving spouse agrees with the bare owners. In that case, all must come to an agreement, in particular, to determine the value of the usufruct and its equivalent in life annuity (or capital).
If the surviving usufructuary spouse and the bare owners disagree
– the matter must be referred to a judge to have the surviving spouse’s usufruct converted into a life annuity;
– the competent court is the tribunal de grande instance of the deceased’s domicile;
– if the judge grants the conversion, he must determine the amount of the annuity, the securities to be provided by the debtor co-heirs and the type of indexation to maintain the equivalence between the annuity and the usufruct;
– the judge is not entitled to convert the usufruct on the main dwelling and its furniture into a life annuity if the surviving spouse who lives there as his or her main residence does not agree;
– if the surviving spouse wishes to convert his or her usufruct into a capital sum but disagrees with the bare owners, he or she cannot resort to a judge: conversion into a capital sum requires an amicable agreement with the bare owners
Effects of the conversion of the usufruct into a life annuity
If the usufruct is converted into a life annuity or capital, the surviving spouse renounces the usufruct: in exchange, he/she receives the annuity. The annuity, therefore, replaces the usufruct.
Good to know: the conversion is only retroactive if the bare owners and the surviving spouse so decide, else it is already included in the division of the estate.
Lifetime usufruct: the tax regime of the transmission
At the first death, the inheritance tax due by the bare owners is based on the value of the bare ownership (after application of the inheritance allowances under common law). This value is calculated by applying the usufruct tax scale of the General Tax Code and changes according to the age of the usufructuary.
The spouse is exempt from inheritance tax on the value of the usufruct. Then, on the spouse’s death, the bare owners retain full ownership of the sums, free of tax.
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