Rory McFarlane of Durban attorneys Shepstone and Wylie looks leaving the usufruct rights to beneficiaries in your will in this the fifth article in his series on Estate Planning.
A usufruct is the right to use and enjoy another person's property and to take all its fruits or produce.
In law a usufruct is a limited real right. This means that while you enjoy the benefits, you may not sell the property and your right of enjoyment is for a limited period or, at most, for your lifetime.
A simple example of a usufruct in a will would be "I bequeath my farm to my son Tom subject to the lifelong usufruct over such property in favour of my wife Mabel."
The person who enjoys a usufruct is known as a usufructuary. On the death of the usufructuary the right to use and enjoy ceases but the benefit will accrue to some other person, either a new usufructuary or the owner of the property, who will now enjoy it in the place of the deceased. The right of enjoyment which accrues to the other person has a value for estate duty purposes.
For estate planning purposes there are several applications for usufructs depending on the objectives of the planner.
Firstly, if spouses married out of community of property have separate estates then the spouse with more assets donates a right of usufruct to the other spouse.
The donation is not subject to donations tax because of the exemption applicable to donations between spouses.
Another application is to bequeath a usufruct to a surviving spouse either directly or by means of a will trust. In this case it is important that the right of enjoyment should vest in the spouse. The value of the right will be deductible for estate duty purposes in the estate of the predeceased spouse.
A more intricate variation of the bequest of a usufruct can achieve a limitation of liability for estate duty on the death of the first dying spouse and also on the death of the survivor. In this case an inter vivos trust is interposed.
Here the father forms a family trust which will ultimately receive the assets from his estate. The income beneficiaries are the wife and children and the capital beneficiaries are the children.
In his will the father leaves his assets to the trust with a usufruct in favour of his wife for, say, 10 years with a provision that if she does not survive the 10-year period then his children are to enjoy the fruits of the usufruct for a fixed two-year period.
Ask your attorney how you can implement any of these plans involving usufructs to the best advantage of your estate and your heirs.