Division of ownership

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«"Alexis, I'd like to give an apartment to my children to reduce their future inheritance taxes, but I can't afford to lose the rent I receive. What can I do?"»

This issue is central to wealth management engineering. The answer lies in a powerful and age-old legal mechanism: the division of ownership.

At the house of Balmont Conseil, We use this lever as a true keystone of your transmission strategy. As an Augmented Asset Engineer, my mission is to make this technique accessible and to orchestrate it so that it serves your protection and...'tax optimization.

Personalized analysis

What is the division of ownership rights?

The division of ownership rights is a legal optimization strategy based on the division of property rights, a concept inherited from Roman law. In French law, the <b>full ownership</b> The rights of an asset should not be seen as an indivisible block, but as a bundle of three distinct prerogatives:

  • Usus: The right to use the property (to live in it).
  • The Fructus: The right to collect the fruits thereof (rents or dividends).
  • The Abuse: The right to dispose of it (sell it, give it away or destroy it).

    • The split of ownership consists of separating these rights to distribute them between two distinct entities, thus creating two types of rights holders:

    Usufruct: Enjoyment and Income

    The usufructuary holds the'Usus and the Fructus. It is the right to use the property and receive the income from it. For a self-employed professional, usufruct offers strategic advantages:

  • Personal or rental use: The usufructuary can choose to live in the dwelling, occupy their professional premises or rent out the property to collect 100 % of the rents.
  • Responsibility for charges: In return for the income, the usufructuary generally assumes the current expenses and taxes related to the use (property tax, routine maintenance).
  • Temporary or lifetime nature: The usufruct ends either on a predetermined date (temporary split of ownership), or upon the death of the usufructuary (life split of ownership).

    • Bare ownership: Structural ownership

    The bare owner holds the'Abuse. This is the right to dispose of the property and the certainty of becoming its full owner upon the termination of the usufruct. Its specific characteristics are as follows:

    • Mechanical recovery: Over time, the value of the bare ownership increases mechanically as one gets closer to land consolidation, without this generating immediate taxation.
    • Capital preservation: The bare owner is responsible for the structure of the property. He is generally responsible for "major repairs" (roof, load-bearing walls) as defined by articles 605 and 606 of the Civil Code.
    • Limited right of disposal: He can sell his bare ownership, but can only sell the full ownership of the property with the express agreement of the usufructuary.

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

    Temporary split of ownership vs. life split of ownership

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

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    Why resort to Split of ownership? Key advantages

    Split of ownership is not just a legal concept; it is a tool of estate planning with multiple benefits.

    A low-cost transfer of assets

    By carrying out a gift with reservation of usufruct, You give the bare ownership to your children while retaining the use of the property.

    • The tax benefit: Gift taxes are calculated only on the tax value of bare ownership (which is a fraction of the total value depending on the age of the usufructuary).
    • The tax allowance on gifts: You benefit from the legal allowances (€100,000 per parent and per child every 15 years) on a reduced taxable base.

    Protection of the surviving spouse

    In the case of an inheritance, the surviving spouse in usufruct can remain in the family home and receive investment income, guaranteeing their standard of living, while the children are bare owners.

      Optimized taxation (Wealth Tax and Income Tax)

      The bare owner is not taxed on the income (since they do not receive it). Furthermore, in the context of a split ownership arrangement, it is generally the usufructuary who is liable for the French Real Estate Wealth Tax (IFI) on the full ownership value of the property.

      How does land consolidation work?

      THE property consolidation is the culmination of a split of ownership strategy. It is the legal and patrimonial moment when the usufruct (the right of use and receipt of income) merges with the bare ownership (ownership of the building) to reconstitute the full ownership in the hands of the bare owner.

      The mechanism of natural extinction

      For a self-employed professional, this mechanism is an exceptionally powerful tool for transferring assets. Unlike a sale or a traditional inheritance, the consolidation of ownership is carried out by extinction :

    • Meeting by right: At the end of the agreed term (death of the usufructuary or end of a temporary period of 10 to 20 years), the usufruct simply terminates. There is no transfer of ownership per se, since the bare owner already possessed the property, but under a "burdened" condition.
    • Neutral taxation: This is where the major advantage lies. Under Article 1133 of the General Tax Code, the combination of usufruct and bare ownership does not give rise to no opening of transfer rights, nor to any land registration tax.

      • Why is this the most effective method for a liberal?

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

    • Freezing the tax value: Gift tax is paid only on the value of the bare ownership at the time of signing. All future appreciation of the property (capital gains) and the value of the usufruct recovered are entirely exempt from tax upon consolidation.
    • Administrative simplicity: Unlike inheritance proceedings, which can delay the management of assets for months, reunification is immediate. The full owner can dispose of the property, sell it, or rent it out without waiting for a complex notarial deed.
    • Protection of the spouse or children: For a professional practice whose premises are held in a SCI (real estate investment company), cross-ownership or gift of bare ownership makes it possible to secure the future of relatives while retaining control of the work tool and income (rents) for as long as necessary.

      • In summary, land consolidation is the only real estate transaction that allows you to increase the value of your net assets without no tax friction, transforming an inheritance constraint into a smooth and optimized transfer.

      Practical applications: Investment examples

      Buying bare ownership

      An investor buys the bare ownership of a property at a significant discount (often 30 to 40%). For 15 years, they have no management or tax concerns. At the end of the term, they regain full ownership of a property that has increased in value.

      The usufructuary in SCPI

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

      Obligations and allocation of costs

      There management of split assets imposes a precise distribution of rights and duties as defined by the Civil Code:

      • The usufructuary: He must ensure routine maintenance and pay for charges and repairs Say "maintenance". He also pays the property tax.
      • The bare owner: He is in charge of "major repairs" (retaining walls, vaults, complete roofs).

      Balmont's expertise: To avoid any conflict between heirs, We recommend drafting a customized ownership division agreement to arrange this distribution.

      What are the tax advantages of splitting ownership rights?

      The division of ownership rights is one of the most powerful tax tools for transferring assets. Its effectiveness rests on a simple principle: reduce the taxable base while retaining the property's income.

      A reduced taxable base thanks to the tax scale

      In a gift with reservation of usufruct, gift taxes are not calculated on the total value of the property, 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 French General Tax Code):

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

      👉 The younger the donor, the more important tax optimization becomes.

      Concrete example of tax gain

      Let's take a simple case:

      • Property value: €500,000
      • Donor aged 65 → bare ownership = 60 %

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

      By applying the parent-child allowance of €100,000:

      • Final taxable base = €200,000

      👉 Result:

      • Without split of ownership: taxation on €500,000
      • With split of ownership: taxation on €200,000

      ➡️ A massive reduction in gift taxes

      SituationTaxable baseTaxation
      Without split of ownership500 000 €High
      With split of ownership200 000 €Greatly reduced

      The tax savings can amount to several tens, or even hundreds of thousands of euros.

      A tax optimization with a double effect

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

      1. Freezing of tax value

      👉 The taxes are calculated at the time of the gift
      👉 All future appreciation of the property is tax-exempt

      2. Tax-free transfer through land consolidation

      👉 Upon termination of the usufruct (death or end of the period):

      • The bare owner regains full ownership
      • Without paying any additional fees

      Key points to remember

      The division of ownership rights allows for:

      • Reduce the taxable base immediately
      • Anticipating transmission
      • Avoiding taxation on future valuation
      • Transferring assets with minimal tax costs

      It is an essential lever for any optimized wealth management strategy.

      FAQ Masterclass The division of ownership

      How is the value of the usufruct estimated?

      Is a notary mandatory?

      What is cross-split of ownership?

      Your wealth management facilitator

      The division of ownership is a complex financial arrangement who cannot tolerate improvisation. At Balmont Conseil, We support you every step of the way:

      1. Audit of your real estate assets and financial.
      2. Simulation of the calculation of gift taxes to optimize your tax savings.
      3. Connecting and coordinating with the notary for the drafting of legal documents.
      4. Long-term monitoring managing your split assets.

      Don't suffer the consequences of inheritance tax, plan for it.

      Schedule an appointment with Alexis Sagnier for a personalized study of split of ownership.

      Alexis Sagnier

      With over 17 years of expertise in financial engineering, Alexis Sagnier assists executives and expatriates in securing their cross-border challenges.

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      Sources & References:

      • General Tax Code (CGI) : Article 155 B.
      • Official Bulletin of Public Finances (BOFiP) : Impatriate regime (BOI-RSA-GEO-40).
      • 2025 Finance Law Analysis of recent developments.
      • Case law on impatriation : Decisions of the Council of State on reference remuneration.
      • ANACOFI Member Booklet : Standards for consulting in wealth engineering.

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