To bequeath usufruct to someone is a common way of providing for your next of kin after your death, but people often forget that usufruct can place an enormous financial burden on the actual heirs to your estate.
To bequeath usufruct to someone is a common way of providing for your next of kin after your death, but people often forget that usufruct can place an enormous financial burden on the actual heirs to your estate. Nigel Benetton explains…
Thu, 28 Apr 2005
Originally published in www.insurance-times.net
Usufruct means the right to use and enjoy the profits and advantages of something belonging to another, as long as the property is not damaged or altered in any way (from the Latin, fructus, meaning ‘enjoyment’. ‘Fruit’ is a related word).
Berrie Botha, executive head of Sanlam Trust, says usufruct can be described as a life interest someone acquires in terms of a will: “It gives the usufructuary the right to use and enjoy specific assets of the estate for the term stipulated by the testator in the will.
“A husband could, for example, in his will bequeath a residential property to his children, but stipulate that his wife should enjoy usufruct until the day she dies. In this way he ensures that she has the use and enjoyment of the property,” says Botha.
But people sometimes forget that usufruct can have implications for the other heirs, in this case the children who have inherited the house. But let’s first take a look at the rights of the wife as usufructuary.
The usufruct’s rights
“Although the law requires the wife to act as a diligent owner that may not misuse the asset, she is not bound to any person. She is expected to use the usufruct properly for the purposes intended. She has the right to either live in the house herself, or rent it out to generate an income.
“Should she let the house; the term of the rental agreement may not exceed that of the usufruct. She is responsible for paying the assessment rights and general daily maintenance costs, but is not obliged to do large-scale repairs resulting from normal wear and tear. Even if an item were to perish due to daily use, she would not be obliged to replace it.
“The wife as usufructuary is also not obliged to insure the property against fire, storm or other damage, although a person in this position is strongly recommended to do so, possibly in cooperation with the children.”
But these ‘rights’ could cause problems for the children, the ultimate heirs, warns Botha. While the usufruct is in effect, the children, who are the ultimate heirs of the house, have no right and authority with regard to the use or enjoyment of the asset. Although it was bequeathed to them, it is subject to usufruct by their mother. They have to refrain from interfering, although they naturally have the right to protect their interests should the usufructuary misuse the assets.
Financing the usufruct
The children may insure the asset and pay the premiums themselves. All major or essential maintenance or repairs will be for their account, and they must make sure that the house is in a liveable condition at all times. This is where the children may encounter problems, says Botha, as there is often not enough money available to finance such repairs.
“That’s why it’s so important that a testator who bequeaths usufruct should make financial provision for the maintenance of the usufruct asset. Otherwise he or she could unnecessarily burden the heirs or even cause them financial problems. A life policy is a very cost-effective way of doing this.”
The usufruct lapses when the usufructuary dies. If the heirs die before the usufructuary, their share of the usufruct assets is transferred to their heirs, but remains subject to the existing usufruct.