Division of Ownership (Démembrement de Propriété)

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« Alexis, I would like to give a flat to my children to reduce their future inheritance costs, but I cannot afford to lose the rental income I receive. How can I do this? »

This challenge lies at the very heart of wealth engineering. The answer rests on a powerful, age-old legal mechanism: the division of ownership (démembrement de propriété).

At Balmont Conseil, we use this lever as a genuine cornerstone of your transmission strategy. As an Augmented Wealth Engineer, my mission is to make this technique accessible and to orchestrate it so that it serves your objectives of protection and tax optimisation.

Personalised analysis

What is the division of ownership (démembrement de propriété)?

The division of ownership is a legal optimisation strategy based on splitting the right of ownership, a concept inherited from Roman law. Under French law, the <b>full ownership</b> of an asset should not be seen as an indivisible whole, but as a bundle of three distinct prerogatives:

  • Usus: The right to use the asset (to live in it).
  • Fructus: The right to receive its fruits (rents or dividends).
  • Abusus: The right to dispose of it (to sell, give or destroy it).

    • The division of ownership consists of separating these rights to allocate them between two distinct parties, thereby creating two types of rights-holders:

    The Usufruct: enjoyment and income

    The usufructuary holds the Usus and the Fructus. This is the right to use the asset and to receive the income from it. For a self-employed professional, the usufruct offers strategic characteristics:

  • Personal or rental use: The usufructuary may choose to live in the property, to occupy their professional premises or to let the asset in order to receive 100% of the rents.
  • Responsibility for charges: In return for the income, the usufructuary generally bears the day-to-day charges and taxes relating to use (property tax, routine maintenance).
  • Temporary or lifetime nature: The usufruct ends either on a predefined date (temporary division) or on the death of the usufructuary (lifetime division).

    • The Bare Ownership: structural ownership

    The bare owner holds the Abusus. This is the right to dispose of the asset and the certainty of becoming its full owner when the division comes to an end. Its specific features are as follows:

    • Mechanical appreciation: Over time, the value of the bare ownership increases mechanically as the reconstitution of full ownership approaches, without generating any immediate taxation.
    • Preservation of capital: The bare owner is the guarantor of the asset’s structure. They are generally responsible for the "major repairs" (roofing, load-bearing walls) as defined by Articles 605 and 606 of the Civil Code.
    • Limited right of disposal: They may sell their bare ownership, but may only sell the full ownership of the asset with the express agreement of the usufructuary.

    For the self-employed professional, this separation is the ideal tool to decouple income (often already high and heavily taxed) from the build-up of capital over the long term.

    Temporary division vs lifetime division

  • Lifetime division: The most common within a family context. It lasts until the death of the usufructuary.
  • Temporary division : Set for a fixed period (for example 10 or 15 years). It is often used for strategies involving the temporary division of usufruct for the benefit of a student child or a company.

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    Why use the division of ownership? The key advantages

    The division of ownership is not merely a legal concept; it is a wealth-planning tool with multiple benefits.

    Passing on wealth at reduced cost

    By making a gift with reservation of usufruct, you give the bare ownership to your children while retaining the use of the asset.

    • The tax gain: Gift duties are calculated only on the tax value of the bare ownership (which is a fraction of the total value according to the usufructuary’s age).
    • The gift allowance: You benefit from the statutory allowances (€100,000 per parent and per child every 15 years) on a reduced taxable base.

    Protecting the surviving spouse

    On a succession, the surviving spouse holding the usufruct can remain in the family home and receive the income from the investments, safeguarding their standard of living, while the children are the bare owners.

    Optimised taxation (IFI and income)

    The bare owner is not taxed on the income (since they do not receive it). Moreover, within the framework of a division of ownership, it is generally the usufructuary who is liable to the Real Estate Wealth Tax (IFI) on the full-ownership value of the asset.

    How does the reconstitution of ownership work?

    The reconstitution of ownership (remembrement) is the culmination of a division-of-ownership strategy. It is the legal and patrimonial moment at which the usufruct (the right of use and to receive income) rejoins the bare ownership (ownership of the walls) to reconstitute full ownership in the hands of the bare owner.

    The mechanism of natural extinction

    For a self-employed professional, this mechanism is a transmission lever of rare power. Unlike a sale or a conventional succession, the reconstitution takes place by extinction:

  • Automatic reunion: At the agreed term (death of the usufructuary or the end of a temporary period of 10 to 20 years), the usufruct simply lapses. There is no transfer of ownership as such, since the bare owner already owned the asset, albeit in an "encumbered" manner.
  • Neutral taxation: This is where the major advantage lies. Under Article 1133 of the General Tax Code, the reunion of the usufruct with the bare ownership gives rise to no charge to transfer duty, nor to any land registration tax.

    • Why is this the most effective method for a self-employed professional?

    The effectiveness of this strategy rests on anticipation. By separating the rights of ownership as early as possible, you act on several levers:

  • Freezing the tax value: Gift duties are paid only on the value of the bare ownership at the time of signature. All the future appreciation of the asset (property capital gain) and the value of the usufruct recovered escape taxation entirely at the reconstitution stage.
  • Administrative simplicity: Unlike succession procedures, which can hold up the management of an estate for months, the reconstitution is immediate. The full owner can dispose of the asset, sell it or let it without waiting for a complex notarial deed.
  • Protection of the spouse or children: For a self-employed practice whose premises are held through an SCI, cross-division or the gift of bare ownership makes it possible to secure the future of one’s loved ones while retaining control of the working asset and its income (rents) for as long as necessary.

    • In short, the reconstitution of ownership is the only property transaction that makes it possible to increase the value of one’s net wealth with no tax friction whatsoever, turning a succession constraint into a smooth and optimised transmission.

    Practical applications: investment examples

    Buying in bare ownership

    An investor buys the bare ownership of an asset at a significant discount (often 30 to 40%). For 15 years, they have no management or tax concerns. At the term, they recover the full ownership of a re-valued asset.

    The SCPI usufructuary

    Placing cash as a usufructuary in SCPI units allows a company or an individual to boost their income over a short period, while the bare-ownership units are held by a third party or by children.

    Obligations and the allocation of charges

    The management of divided assets requires a precise allocation of rights and duties as defined by the Civil Code:

    • The usufructuary: They must ensure routine upkeep and pay the charges and repairs classed as "maintenance". They are also liable for the property tax.
    • The bare owner: They bear the cost of the "major repairs" (retaining walls, vaults, complete roofs).

    The Balmont expertise: To avoid any dispute between heirs, we recommend drawing up a bespoke division agreement to arrange this allocation.

    What are the tax advantages of the division of ownership?

    The division of ownership is one of the most powerful tax tools for passing on wealth. Its effectiveness rests on a simple principle: reducing the taxable base while retaining the income from the asset.

    A reduced taxable base thanks to the tax scale

    On a gift with reservation of usufruct, gift duties are not calculated on the total value of the asset, but only on the value of the bare ownership.

    👉 This value is determined according to an official tax scale based on the age of the usufructuary (Article 669 of the CGI):

    • Under 21: usufruct 90% / bare ownership 10%
    • 21 to 30: usufruct 80% / bare ownership 20%
    • 31 to 40: usufruct 70% / bare ownership 30%
    • 41 to 50: usufruct 60% / bare ownership 40%
    • 51 to 60: usufruct 50% / bare ownership 50%
    • 61 to 70: usufruct 40% / bare ownership 60%
    • 71 to 80: usufruct 30% / bare ownership 70%
    • 81 to 90: usufruct 20% / bare ownership 80%
    • Over 91: usufruct 10% / bare ownership 90%

    👉 The younger the donor, the greater the tax optimisation.

    A concrete example of tax gain

    Let us take a simple case:

    • Value of the property: €500,000
    • Donor aged 65 → bare ownership = 60%

    👉 Taxable base = €300,000 (instead of €500,000)

    Applying the €100,000 parent-to-child allowance:

    • Final taxable base = €200,000

    👉 Result:

    • Without division: taxation on €500,000
    • With division: taxation on €200,000

    ➡️ A massive reduction in gift duties

    Situation Taxable base Taxation
    Without division €500,000 High
    With division €200,000 Greatly reduced

    The tax saving can reach tens, or even hundreds, of thousands of euros.

    A twofold tax optimisation

    The division of ownership is not limited to an immediate reduction:

    1. Freezing the tax value

    👉 Duties are calculated at the time of the gift
    👉 All the future appreciation of the asset escapes taxation

    2. Transmission free of tax at the reconstitution stage

    👉 On the extinction of the usufruct (death or end of the period):

    • The bare owner recovers full ownership
    • Without paying any additional duties

    Key takeaways

    The division of ownership makes it possible to:

    • Immediately reduce the taxable base
    • Anticipate the transmission
    • Escape taxation on future appreciation
    • Pass on wealth at a minimal tax cost

    It is an essential lever for any optimised wealth strategy.

    Masterclass FAQ: The division of ownership

    How is the value of the usufruct estimated?

    Is a notary compulsory?

    What is cross-division of ownership?

    Your facilitator in wealth engineering

    The division of ownership is a complex financial arrangement that leaves no room for improvisation. At Balmont Conseil, we support you at every step:

    1. Audit of your property and financial assets.
    2. Simulation of the calculation of gift duties to optimise your tax gain.
    3. Introduction to and coordination with the notary for the drafting of the deeds.
    4. Long-term monitoring of the management of your divided assets.

    Do not endure the taxation of succession — anticipate it.

    Book an appointment with Alexis Sagnier for a personalised division-of-ownership study.

    Alexis Sagnier

    With over 17 years of expertise in financial engineering, Alexis Sagnier supports business owners and expatriates in securing their cross-border interests.

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    Sources & References:

    • General Tax Code (CGI): Article 155 B.
    • Official Bulletin of Public Finances (BOFiP): Inbound-assignee regime (BOI-RSA-GEO-40).
    • 2025 Finance Act: Analysis of recent developments.
    • Case law on inbound assignment: Rulings of the Conseil d'État on the reference remuneration.
    • ANACOFI Member Handbook: Standards of advice in wealth engineering.

    Voir

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