Usufruct and bare ownership in wealth planning

Wealth planning offers one lever that is often underestimated: separating the enjoyment of an asset from its ownership. Swiss law makes this possible through usufruct and bare ownership. It is a tool that allows wealth to be passed on to the next generation while the person transferring it keeps the right to continue using the asset and collecting its income. Used wisely, it reconciles two seemingly opposing needs: to give and to hold on.

Two rights over the same asset

When a usufruct is established, full ownership splits into two:

The usufructuary has the right to use the asset and to collect its fruits: living in a property or receiving the rent, receiving the dividends from a block of shares, the interest on a sum of capital.
The bare owner holds title to the asset but, for as long as the usufruct lasts, cannot enjoy it or dispose of it freely. When the usufruct ends — typically on the death of the usufructuary — they regain full ownership with no further formalities.

Usufruct is a personal and non-transferable right: it lapses with the person in whose favour it was established and does not pass to the heirs.

The typical use in succession planning

The classic scheme: a parent gifts a property to their children while reserving the usufruct. In this way:

The children immediately become bare owners: the asset leaves the parent’s estate and enters theirs.
The parent continues to live in the property or collect its rent for life.
On the parent’s death, the children consolidate full ownership without the asset returning to the estate to be divided.

The advantage is bringing the transfer forward — reducing future conflicts and organising the succession while still present — without giving up the economic security of the income or the home.

Who pays what

The allocation of costs follows a precise logic that should be understood before signing:

The usufructuary bears the ordinary expenses: routine maintenance, running costs, interest on debts charged to the asset, ordinary insurance premiums.
The bare owner takes on the extraordinary expenses and structural work.
The usufructuary must preserve the substance of the asset and return it, at the end, in the condition it should be in under diligent management.

Clarifying these points in the deed of establishment avoids disputes between parents and children in the years that follow.

Tax aspects to weigh up

The tax treatment depends on the canton and on the nature of the asset, but some principles recur:

The usufructuary, enjoying the fruits, generally declares the income from the asset (rents, imputed rental value, capital income) and often its value as well for wealth tax purposes.
Gifts and gratuitous transfers may fall under gift tax, with rules and allowances that vary greatly from canton to canton: between parents and children, many cantons provide exemptions.
The value of the usufruct is capitalised according to the age of the usufructuary, which affects the taxable base of the transfer.

Given the strong cantonal variation, every operation must be assessed case by case: there are no rules that hold everywhere.

Alternatives and limits

Usufruct is not always the best solution. In some cases it is preferable to opt for:

A right of residence, which is more limited: it grants only the right to live in the property, not to let it, and is likewise personal.
An annuity payable by the recipient of the gift, if the aim is above all to secure an income stream.
Retaining full ownership with testamentary provisions, when future flexibility matters more than bringing the transfer forward.

The main limitation of usufruct is its rigidity: once established, it ties up the asset for the life of the usufructuary. Selling the property becomes complicated, because it requires the agreement of both parties.

A decision to coordinate

Usufruct and bare ownership touch on succession law, cantonal taxation and family relationships all at once. They should be built into overall planning, not decided in isolation: a tax-efficient operation can create family tensions, or vice versa.

How we help you

We assess whether and how usufruct and bare ownership fit into your wealth-transfer plan, coordinating the civil, tax and family aspects. Plan the transfer of your wealth with us.