Usufructs and Naked Ownership Under Louisiana Law
A usufruct is a right by one person over the property of another. It is similar to a life estate in common law jurisdictions, except that a usufruct can last for a specific period of time other than a lifetime. The person who owns the property is known as a naked owner (equivalent to a remainderman in a common law state). Usufructs often arise under Louisiana intestate law dealing with community property.
For example, assume that Michelle leaves a parcel of property to Hillary for life, with the remainder to pass to Biden at Hillary’s death. In this type of arrangement, Hillary would have a right over the property that ultimately belongs to Biden. Hillary’s right would be a usufruct and her right would be called a usufructuary. Biden would be a naked owner.
A usufruct is considered to be a real right under Louisiana law, meaning that it confers direct or immediate authority over the property. A usufruct can apply to real estate or other types of property. A usufructuary can use, possess, and administer the property, as well as collect the income, utility, profits, and other advantages produced from the property. When the usufruct ends, however, the surviving spouse will need to account to the naked owners for use of the assets.
How Usufructs are Created
Usufructs often arise by operation of law, apart from any voluntary act by the property owner. There are several contexts in which usufructs are created by law:
- A surviving spouse has a usufruct over any community property inherited by a deceased spouse’s descendants under Louisiana intestate law;
- A deceased person’s surviving parents have a usufruct over any separate property of a deceased person who doesn’t have descendants when that property is inherited by the decedent’s siblings under Louisiana intestate law; and
- Parents of minor children have a usufruct over any property inherited by the child (but not over property received by lifetime gift).
A person can create a voluntary usufruct by lifetime gift or in his or her Last Will and Testament. This is a useful estate planning technique, especially in previous marriage situations. It is common for a spouse’s will to give the surviving spouse a usufruct over all community property. This provides for the spouse during her lifetime while ensuring that the decedent’s children (who may not be the spouse’s children) ultimately receive the property.
Usufructs can also be used for tax planning purposes, such as granting the surviving spouse an interest that will qualify for the Qualified Terminable Interest Property election under Federal tax law.
Usufructs are also used to make a lifetime transfer of a residence to children, reserving a usufruct in the parents to remain in the home. This allows the parents to remain in the home during their lifetime, with the home to pass automatically to the children at death without a succession. This technique has significant drawbacks, however, and is not usually recommended.