The Usufruit and the quasi-usufruit in wealth management are
less than well advertised as a simple and straightforward solution
to the intergenerational succession to offshore portfolios. For
example, this is of interest to Grandparents later in life who wish
to gratify their childern or grandchildren without surrendering the
ability to live off their assets.
A recent decision by the Conseil d'Etat, which set aside both a
first instance and a Court of appeal decision, took the case as if
at first instance. The judgment has shown that, provided
adequate drafting precautions are taken to remain within the strict
wording of the Code civil, the use of a usufruit dismemberment
coupled with a quasi-usufruit convention can, even in the closest
family situations be considered non-abusive. For more details,
contact me on that.
The CRS issues over Trusts and who exactly is to be reported, in
what capacity, by whom and for what "account" need to be taken in
The OECD have, with five league boots, made Napoleonic strides
in marshalling the world into information shearing folds, but
has reserved the full fleecing section for those involved with
trusts. Each of the interveners in a trust is considered to have a
reportable dare I say quasi-proprietary interest in an account. Any
attempt to draw the multiplex nature of this to the attention of
the OECD is met with a response indicative of a complete lack of
understanding of the concept as it is. If however one
addresses it as the Organisation de Coopération et Développement
Economique, then all become clearer, at least as to why.
That is the difficulty where administrative practice parts
company with the laws of property and considers what it does not
apprehend to be contractual rather than proprietary.
So why is the sauce for the equitable goose not sauce for the
civil law ganders? Par for the course on the nearby Auteuil,
perhaps? Or simply using the Code civil as an eye-patch? One
can only be civil, so:
The French usufruit over movables is well known, but its full
usefulness in both a banking and wealth management is little
understood outside France and civilian usufructuary systems.
What is even less appreciated is the subtlety which can be
introduced into a succession over an investment portfolio in France
by a convention de quasi-usufruit over the portfolio, which in
effect carves out income and disposal rights to the usufruitier
with an obligation to reimburse the nus-propriétaires.
For example, one opportunity for this, in France - why not
elsewhere - arises in the aftermath of the sale of a Société
civile, immobilière or otherwise, where the elder generation is
left holding a usufruit, again well known in Jersey property law,
and the next generation holds the nue-propriété. The use of a
usufruit over movables such as shares and portfolios is also known
in Jersey, and has provided a useful mechanism for those who have
been made aware of it. It is not restricted to the
The quasi-usufruit whether notarised or not, is a mechanism
developing the mechanism whereby assets or cash consumed by the
usufruitier constitute a debt of their estate due to the
nus-propriétaires. The debt is deductible from the value of
the usufruitier's estate at death. The usufruit mechanism
extinguishes at nil value on death, and is therefore not brought
into account in the usufruitier's succession. The debt for that
which has been consumed then is owed and paid to the
It is now clear that French banks are only reporting the
(quasi-)usufruitier of an investment account and omitting any
indication of the nue-propriété.
How do they manage this? Simply: the porfolio account is in the
name of the usufruitier alone and not the usufruitier and the
nu-propriétaire. The nu-propriétaire in fact retreats from
ownership as such to a mere right of créance for cash or assets
consumed, taking the account or what is left on it back without
charge to succession duty on the decease of the usufruitier, with a
right to require restitution of capital consumed. Neat isn't
it? Hardly surprisng that the OCDE, in its French formation,
takes it all out on trust accounts, where the nu-propriétaire
"equivalent" would also be exposed.
Rather than falling into the trap of justified outrage - of
kettles calling pots black, why not use it?
We have the legal machinery to institute a quasi-usufructuary
mechanism available in Jersey, I have contributed to certain
instruments using this, and it does work.
There is ample scope for its use in client relationships with
the United Kingdom, as, for example, a trust company can be a
nu-propriétare, thus advancing capital whilst retaining the
right to restitution of cash or fungible capital consumed out of
the UK resident's estate, whether situated in the UK or outside it,
for example, in Jersey.
If Pascal Saint Amand is turning a Nelsonian blind eye to this
Pan Gaia declarative absence so as to enable non-declaration of
real and vested underlying interests in French portfolio accounts,
let us use it as a non-trust instrument to unwind or re-engineer
certain otherwise risky structures for those in aposition to do so.
Please note that even the French tax administration have
stated that a usufruit is not a trust, even by their standards!
Please contact me whether you are banker, fund or investment
manager or even trustee to see how you can use this fruitfully,
with every aspect of the pun intended. If the process can pass
through the notions of abus de droit proferred by the French tax
administration, as confirmed by the Conseil d'Etat, it can
certainly do the same elsewhere.