Usufruct — what is it?

28

One thing that amuses me about law is the seemingly hifalutin jargon. While I was in law school, my classmates and I would be very much entertained by the legal maxims, all expressed in Latin. There are also a number of legal terms from different languages which have found their way in our legal dictionaries. And we would love to use them in class — during recitation, in our moot court and even in our everyday-law-student-life language. And as these terms got ingrained in our minds, we realized that they have become part of our everyday language even today as lawyers. When we are in court, we invoke these Latin edicts. When we write, we find ourselves automatically using our unique jargon. It is as if we, lawyers, have our own language altogether.

One such foreign term is usufruct — pronounced as yoo-sa-frakt. First time I encountered it in law school, I thought it had something to do with fruits or fructose. What is it really?

“Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.” (Article 562, Civil Code)

For a better appreciation, let me give you an example. Parents A and B own a house. As they are already in their twilight years, they donate the property to their only child, C. A and B have a condition though that they will stay in that house for as long as they live. Thus, they enter into a usufruct. By entering into that contract, C has become the owner of the property. He thus has what is called the naked ownership. He, however, does not enjoy it (yet). His parents, on the other hand, have what is termed the beneficial ownership. That means they can enjoy the house for as long as they want. So, with the usufruct, it is as if A and B still “own” the house. They enjoy it. They live in it. They can rent it out if they want to and have the rental income for themselves. But when both move on to the next life, both naked and beneficial ownership fuse and will belong to C. So here, you have the concept of owning a thing and letting someone enjoy or benefit from it in the meantime.

Now, is there any distinct advantage of entering into a usufruct?

Why yes, of course.

Take the example above for instance. As soon as C’s parents donated the property to him, the house was already carved out of their estate. It became the property of C. That means that when his parents move to the next life, there will be no estate taxes that need to be paid. C will not have to go through the hassle of executing an affidavit of self-adjudication declaring that he inherited the property from his parents. Obviously, there will not be any publication of such affidavit announcing the inheritance to the whole world. The physical title, meaning the transfer certificate of title or TCT as it is commonly called, will not have to be annotated with a two-year lien for any future claim on inheritance. In short, the passing away of C’s parents will have no effect anymore on the title of C to the house. The donation-then-usufruct transaction paved the way for a seamless passing of the property from parents to child and avoidance of both hassle and expenses entailed in the settlement of the estate of the deceased. And yet, by virtue of the usufruct, the house “remained the property” of his parents as if it was always theirs during their lifetime. It protected them from being whimsically booted out by C.

So, the next time you encounter the word “usufruct,” view it not as a term associated with fructose. Neither is it a word which seems comprehensible only by lawyers. As you already know what it means, not only can you include it in your vocabulary; you can actually apply it to your life by entering into one. And by doing so, you need not fear going into the realm of the unknown.

What are your thoughts?

Please enter your comment!
Please enter your name here