Dismemberment of Ownership
Legal division of ownership between usufruct (right of use and income) and bare ownership (ownership without enjoyment).
Full definition
Dismemberment of ownership is a legal technique that consists of dividing the ownership right into two distinct parts: usufruct and bare ownership. This separation makes it possible to optimise wealth transfer and taxation.
The usufructuary retains the right to use the property and receive its income (rents), while the bare owner holds the property without being able to enjoy it immediately. When the usufruct ends (death of the usufructuary or agreed term), the bare owner automatically recovers full ownership.
In Luxembourg, dismemberment is particularly used in the context of gifts (gift with reserved usufruct) and life annuity sales (occupied life annuity). It makes it possible to significantly reduce gift or inheritance taxes, as only the value of the bare ownership is taxed. The tax scale defines the respective value of the usufruct and the bare ownership according to the usufructuary's age.
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Related terms
Usufruct
Right to use a property and receive its income (rents) without owning it, more extensive than the right of use and habitation.
Bare Ownership
Ownership right of a property without the right to enjoy it or receive its income, held by the buyer in an occupied life annuity.
Gift
Legal act by which a person transfers a property free of charge to another person during their lifetime.
Occupied Life Annuity
Sale via life annuity where the seller retains the right to live in the property (right of use and habitation or usufruct) until their death.
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