If one of your student children needs additional income and you own rental property, it may be in your interest to make a temporary donation of usufruct in their favor. Concretely, you retain possession of the walls, and your usufructuary donee collects the rents for you during the dismemberment period.
To draw up the deed, you must go before a notary. Upon signature, “donation taxes are calculated on the usufruct transferred, valued at 23% of the price of the property per ten years”, explains Arlette Darmon, notary and president of the Monassier group. A home worth 100,000 euros will therefore have temporary usufruct of 23,000 euros for ten years and 46,000 euros for twenty years. In practice, most of these operations are carried out over periods of three to ten years.
Positive impact on the IFI base
In addition to the fact that it allows a financial boost to a loved one, the temporary donation of usufruct also has tax benefits. As you do not receive the rent, you pay neither tax nor social security contributions on it. On the other hand, they are integrated into your child’s income, the latter being a priori little taxed. In addition, the property falls outside your tax base for real estate wealth tax (IFI), which can allow certain households to save money. As the evaluation is done on January 1, you only have a few weeks left if you want to act on your 2024 IFI.
A donation, not alimony
Please note, for the temporary donation of usufruct to be valid, your child must actually need additional income and the dismembered property must provide them with it. “Otherwise, the operation would have a mainly fiscal purpose and it will be reclassified by the administration,” warns Arlette Darmon. Furthermore, this is indeed a donation, and not food aid. Thus, all income received will be reportable on the day of your inheritance: if you have several children, the one who benefited from the temporary donation will therefore receive a slightly lower share of inheritance than that of their brothers and sisters.
Finally, a temporary dismembered donation is possible on movable assets, a portfolio of shares for example. In this case, your donee will receive dividends from your securities in the same way as rents. It can also be used in favor of another relative, to guarantee additional retirement for one of your parents who is temporarily in need.