Cook, Yancey, King and Galloway, APLC
Perhaps no idea in Louisiana estate planning is more mysterious to the layman than the usufruct. Like many legal concepts, its funny-sounding name is part of its public image problems. A usufruct, however, is nothing to be afraid of. In fact, many Louisiana citizens have them in their last will and testaments, instead of an outright bequest or gift in trust. This article is intended to explain what a usufruct is and how it is used in estate planning.Stated simply, a usufruct grants the use of property for a specific time period, usually a person's lifetime. The person granted use is called the "usufructuary." When the usufruct ends, either through death or otherwise, another person, called the "naked owner," takes the property in full ownership.
A simple example will help explain these various roles. Assume Tom and Betty were married with children until Tom died. In his will, Tom left Betty a lifetime usufruct over all of his property and gave the naked ownership of the property to his children. Betty will have the right to use Tom's property for the remainder of her life. At Betty's death, however, the property subject to the usufruct will pass directly to Tom's children, no matter what Betty's will may say at that time.
If you own a usufruct over property, your rights in that property are fairly broad. The usufructuary enjoys the use of the property, takes the fruits and income of the property, and can even lease or rent the property but only for the term of the usufruct.
The usufructuary has rights in the property, but they also owe obligations to the naked owner. These duties fluctuate depending on the type of property is subject to the usufruct. If the usufruct is over tangible property like a house, land or even shares of stock, then the usufructuary must use the property prudently (including making routine repairs and maintenance) and deliver them to the naked owner when the usufruct ends. If tangible property is sold, the usufruct continues over the property the usufructuary receives in the sale.
If the usufruct is over cash, certificates of deposit, or other such accounts, the usufructuary is deemed to owe a debt to the naked owner in the amount of such property when the usufruct is created. Since cash is more difficult to track than land or stocks, the law simply converts the usufruct rights in such property into a debt. When the usufruct ends, the usufructuary owes the naked owner the value of such property when the usufruct began, regardless of whether the value of the property has increased or has been spent.
Another restriction on the usufructuary's rights in the property involves selling assets. A usufructuary cannot sell tangible assets unless that ability is specifically provided for in the instrument granting the usufruct. Unless such right is granted, the usufructuary and the naked owners must agree on the sale. For this reason, it is far better to give a usufruct pursuant to a last will and testament, rather than by operation of law, which controls if you die without a will. Also, minerals, including oil and gas, under lands subject to the usufruct may be available only to the naked owner in limited instances unless the will provides otherwise.
A usufruct is certainly nothing to be afraid of. It can provide essential access to marital property during the life of the surviving spouse, while preserving those assets for children after such spouse's death. The usufruct concept is often recommended for Louisiana estate planning purposes and can be a valuable tool in planning your final bequests. So, don't be afraid of the funny name.
