Gift of bare ownership: giving while retaining use

Gift of bare ownership: advantages, procedures and tax optimization

A bare ownership donation is a clever and flexible solution for passing on your property (real estate, share portfolio) to the Procure missionnaire de l’Assomption, while retaining the use and enjoyment of it. More and more French people are opting for this type of donation, to prepare their estate, support an association or cause that reflects their values, or optimize their tax situation.

According to the Chambre des Notaires, almost 30% of all real estate donations are made in bare ownership, because of the tax advantages and flexibility involved.
How does bare ownership donation work, what are its advantages and limitations, and how can you set it up in a secure way?

1. What is a bare ownership gift?

A bare ownership gift is a notarized deed by which the donor transfers ownership of an asset (real estate, furniture, financial portfolio) to a donee (e.g. a child, the Procure missionnaire de l’Assomption…), while retaining the usufruct (i.e. the right to use and enjoy it) until his or her death.

Example: “I give bare ownership of my apartment to my son, but I retain the use of it until my death.”

Source: Article 617 of the Civil Code

Differentiating between bare ownership and usufruct

Example:

Donation of an apartment: “I give the bare ownership of my apartment at 15 rue de la Paix, 75001 Paris, to the Procure missionnaire de l’Assomption, but I retain the usufruct.”

2. Why choose a bare ownership donation?

To retain the use of your property

• You continue to live in your home or receive income from it (rent, dividends).
• The donee (e.g. your child or an association) becomes the owner only after your death.

If you give bare ownership of your apartment to your son, you can continue to live there or rent it out until you die.

To take advantage of tax benefits

• Taxable value reduction

The value of bare ownership is lower than that of full ownership, as it does not take usufruct into account. This reduces gift tax.

Calculating the value of bare ownership (depending on the donor’s age):

Example: For an apartment worth €200,000 and a donor aged 65, bare ownership is worth €80,000 (40% of €200,000). Only €80,000 is subject to gift tax.

• Understanding tax relief for associations

Bare-ownership donations to associations that are not recognized as being of public utility, but are simply registered and have an exclusive charitable purpose (such as the Procure missionnaire de l’Assomption) entitle the donor to a 66% tax reduction, up to a limit of 20% of taxable income.

For a donation of €10,000 in bare ownership, you benefit from a tax reduction of €6,600.

Preparing your estate

• Anticipate the transfer of your estate without losing the use of your property.
• Avoid high inheritance taxes by reducing the taxable value of your assets.

Example: By giving bare ownership of your second home to your children, you reduce the value of your estate and limit the taxes payable after your death.

3. How can you make a gift of bare ownership?

There are a few important steps to follow:

1. Evaluate the property with your notary (market value, value of bare ownership).
2. Choose your beneficiary (child, association, etc.).
3. Draw up your deed of gift (which must be notarized for real estate).
4. Declare your donation to the tax authorities to benefit from tax advantages.

Model deeds of gift

• For a property

Sample deed: “I, the undersigned, [Surname and first name], born on [date] in [place], residing at [address], hereby give to La Procure missionnaire de l’Assomption bare ownership of my apartment located at [full address], valued at [amount]. I reserve the usufruct of this property until my death. Signed at [place], on [date]. [Signature].”

Notary fees are approximately 2% to 3% of the value of the bare ownership.

• For a financial portfolio

Sample deed: “I give the bare ownership of my [number] shares in the company [Name], valued at [amount], to La Procure missionnaire de l’Assomption. I reserve the usufruct (dividends) until my death . I reserve the usufruct (dividends) until my death.”

4. What mistakes should you avoid when making a donation?

• Underestimating the value of bare ownership
  • Error: calculating the value of bare ownership without taking the donor’s age into account.
  • Solution: use the official tax scale.
    
• Forgetting to declare your donation
  • Mistake: not declaring the donation to the tax authorities.
  • Solution: always declare the donation to benefit from the tax reduction.

• Choosing a non-eligible donee
  • Error: Donate to an association that is not recognized as being of public utility and that does not pursue an exclusive charitable aim.
  • Solution: Check the eligibility of the donee (e.g.: Procure missionnaire de l’Assomption).

5. Frequently asked questions