A usufruct has become somewhat of a swear word when drafting an estate plan. The tax consequences need to be carefully considered as it could be a costly exercise in the estate of the usufructuary. 

What Is Usufruct?

Usufruct is the right to make full use of an asset without ownership. So, if you have the usufruct over a property, you can live in it, rent it out, holiday in it, and so forth; but because you don’t own it, you can’t sell it. Bare dominium, on the other hand, is ownership without the right of use (usufruct). As the creation of a usufruct is a real right and must be endorsed on the title deed, this will be handled by the Executor in a deceased estate.

An example of a usufruct is where a husband, in his will, leaves his home to his children but directs that his wife has the use of the house and the furniture in it for her lifetime. In this example, on his death the property will be transferred into the name of another person, such as the children or a family trust and the usufruct is simultaneously registered against the new title deeds in favour of his surviving spouse.

When is an usufruct created?

Usufructs created upon the death of a person must be valued. This valuation involves determining the present value of the annual right of use at a fixed rate of 12% per annum over the expected life of the person receiving the benefit, or when the right of enjoyment is a lesser period, over that lesser period.

Example 1  – Married out of community of property without accrual

Scenario 1: A man dies and bequeaths his fixed property to his son (aged 31 years) subject to a usufruct in favour of his wife (aged 54 years).

Calculation of the value at creation of usufruct:

Value of property at creation of the usufruct



Scenario 2: Wife dies 9 years later at the age of 63 years.

Where the Will of the deceased bequeaths his/her fixed property to a Trust but there is a usufruct in place over that fixed property, the calculation is done differently, a fixed period will be used in the calculation of the usufruct.

Example 2  – A Trust holds the bare dominium

Scenario 3: A man dies and bequeaths his fixed property to The Mans Trust subject to a usufruct in favour of his wife (aged 54 years).

Scenario 4: Wife dies 9 years later at the age of 63 years.

A usufruct created under a testament will trigger a part-disposal for capital gains tax (CGT) purposes in the hands of the testator if the usufruct is bequeathed to the surviving spouse, while the bare dominium is bequeathed to another person, such as a family trust. In these circumstances, there will be a disposal of the bare dominium to the deceased estate while there will be a roll-over to the surviving spouse of the value of the usufruct.

Care should be taken when spouses are married in community of property, in which the spouses have a joint will providing for a massed estate. Typically, the deceased spouse transfers the bare dominium to a trust and bequeaths the usufruct to the surviving spouse. It would be expected that the deceased’s half of the bare dominium left to the trust would be subject to CGT at the market value and the usufruct subject to a roll over as it goes to the surviving spouse, however another unintended consequence is that the surviving spouse’s half share of the bare dominium will also trigger CGT at market value as they have had to bequeath their bare dominium to the deceased estate while retaining the usufruct.

The creation of usufructs has some serious estate duty consequences upon the death of the surviving spouse, as it results in a deemed inclusion in his/her estate based on the market value at the date of death and based on the life expectancy of the person who takes over the right of use.

Rights and Obligations of the Usufructuary

In the above examples, the wife:

  • Has the right to use and enjoy the property.
  • Can let it out and earn the rental income.
  • Cannot sell the property, mortgage it, or leave it to someone else in her will.
  • Must ensure that the property is maintained and is not altered or damaged in any way. She must pay the property rates and general day-to-day costs of maintaining it. It is advisable that the deceased spouse leaves enough money, possibly in a separate account, to ensure that the property is maintained and that his wife has enough money to pay for the rates and other property expenses.
  • Is not obliged to do any extensive repairs that result from normal wear and tear or daily use. While there is no obligation for the usufructuary to insure the home against storm, fire, or other such damage, it is advisable and in her own interests to do so; we would suggest that the bare dominium owner confirms with the usufructuary if it is insured or not.
  • May make improvements to the property but may not claim reimbursement when the usufruct ends.
  • Has the right to occupy and use the property until her death or remarriage, depending on what the will states, when the usufruct would lapse, and the full property rights would automatically vest in the bare dominium.

Short Term Tax Benefits

  • A usufruct can reduce the amount that the testator’s estate will have to pay in estate duty of the first dying.
  • However, on the termination of the usufruct or death of the usufructuary, an amount equal to the lower of:
    • The market value multiplied by the expected life factor of the owner of the bare dominium multiplied by 12%, or
    • the current value of the property less value of the bare dominium at creation of the usufruct will be included in the estate of the second dying.

As you can see, the tax consequences of a usufruct created upon death are very complex, and we would advise that a tax specialist be consulted before creating a usufruct.


If you are new to the concept of usufruct, we are here to guide you. Contact us today
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