Usufruct: what it is, how it works and its use in succession

Quick answer: usufruct is the real right to use an asset and receive its fruits without being its owner. Ownership divides into two: the nu-proprietário (bare owner), who holds title to the asset, and the usufrutuário (usufructuary), who uses and enjoys it. It is in the Civil Code, articles 1,390 to 1,411. In succession, it appears in the doação com reserva de usufruto (gift with reservation of usufruct), a technique in which parents give their estate to their children and keep using the assets during their lifetime.

A family patriarch decides to pass the apartment and the company's quotas (ownership stakes) to his two children while still alive, to keep everything from falling into a drawn-out probate in the future. But he does not want to be left with nothing: he wants to keep living in the property and receiving the rent for as long as he lives. The question he brings to the lawyer is always the same. How can he transfer ownership without losing control of, and the income from, what he built? The answer, in most cases, comes down to one word: usufruct.

Usufruct is one of the most useful and least understood institutes in patrimonial law. It allows you to separate who owns from who uses, and it is precisely this separation that makes it a central piece of estate planning. Well structured, it avoids probate over those assets, reduces friction among heirs, and keeps the patriarch or the matriarch in command of the estate until the end.

This text explains what usufruct is, the difference between the bare owner and the usufructuary, who pays for what, how the right arises and is extinguished, and why the gift with reservation of usufruct has become one of the most widely used tools by families who want to organize their succession while alive.

What usufruct is

Usufruct is the real right to use an asset that belongs to another person and to gather the fruits that this asset produces. The Civil Code lists usufruct among the real rights in article 1,225, and governs it in articles 1,390 to 1,411. Under article 1,390, it may fall on one or more assets, movable or immovable, on an entire estate or part of it, encompassing the fruits and the utilities.

The idea behind the institute is to split ownership into two layers that normally travel together. On one side, the right to hold title to the asset, to dispose of it, to sell it one day. On the other, the right to use, live in, farm, rent out, and receive the income. In usufruct, these two layers end up with different people. The one who keeps title is the bare owner. The one who keeps the use and the income is the usufructuary.

The fruits the law refers to are of two kinds. Natural fruits, such as a farm's harvest, and civil fruits, such as the rent of a property or the dividends of a company's quotas. All of this belongs to the usufructuary during the usufruct period, even though he is not the owner of the asset. That is why the institute is of such interest to those who want to transfer their estate without giving up the income it generates.

Bare owner and usufructuary: who is who

The most common confusion starts here, so it is worth separating it clearly. The bare owner is the holder of title to the asset. He has the so-called nua-propriedade (bare ownership), that is, the ownership "stripped" of use and enjoyment. The asset is in his name, it appears on the property's matrícula (registry record) or on the company's articles of association, but he cannot use it or draw income from it while the usufruct lasts. The usufructuary is the one who actually lives the asset: uses it, manages it, and keeps the fruits.

Article 1,394 of the Civil Code sums up the usufructuary's rights: possession, use, administration, and collection of the fruits. In practice, it is the usufructuary who lives in the property, who receives the rent, who runs the day-to-day administration of the asset. The bare owner watches all of this from the outside, secure in the knowledge that, one day, full ownership will return to his hands.

This division also allocates duties, and this is the point that raises the most doubt. Under article 1,403 of the Civil Code, the ordinary expenses of preserving the asset and the taxes owed on possession or on the income from the thing fall to the usufructuary. In plain terms, whoever enjoys the property is the one who pays the IPTU (municipal property tax) and the ongoing maintenance. Extraordinary repairs and larger expenses, those fall to the bare owner. The table below organizes the split.

How usufruct is constituted

Usufruct can arise in three ways. The most common in family planning is constitution by an act between living persons, usually within a gift, when the donor reserves for himself the usufruct of the asset he is giving away. The second is by will, when someone leaves the use of an asset to one heir and title to another. The third is the one that flows directly from the law, such as the parents' usufruct over the assets of their minor children.

For real estate, there is a formality that cannot be ignored. Article 1,391 of the Civil Code provides that the usufruct of real estate, when it does not result from usucapião (acquisitive prescription), is constituted through registration at the Cartório de Registro de Imóveis (Real Estate Registry Office). Without that registration on the matrícula, the usufruct does not produce the effect of a real right against third parties. It is a mistake we see often: the family signs the gift deed with reservation of usufruct and forgets to take it to registration, and the right is left half-done.

The usufruct period is also defined at its constitution. It can be for life, when it lasts as long as the usufructuary lives, or temporary, when it has a fixed term. In estate planning, the lifetime usufruct is the most used, because it guarantees the donor the use of and income from the asset until the end of life.

What the usufructuary can and cannot do

The usufructuary has broad powers over the asset, but they have a clear limit. He can use it, manage it, and gather the fruits, but he is not the owner and cannot dispose of the asset as if he were. Article 1,393 of the Civil Code is direct: the usufruct cannot be transferred by alienation. That is, the usufructuary does not sell the usufruct, nor pledge it as security as if it were property.

There is, however, a fine and important distinction. The same article 1,393 allows the exercise of the usufruct to be assigned, whether for free or for consideration. The usufructuary cannot transfer the right itself, but he can assign to someone the concrete use of the asset. That is what happens when the usufructuary rents out the property: he remains the holder of the usufruct and merely passes the use on to the tenant, keeping the rent. This is the legal basis that allows the usufructuary to live off the income of the estate he has already given away.

The usufructuary also has duties of safekeeping. He must preserve the asset, use it without destroying it, and return it, at the end, in the condition in which he received it, except for natural wear. A serious breach of these duties can, in extreme situations, lead to the extinction of the usufruct, as we will see further on.

The gift with reservation of usufruct in estate planning

Here is the heart of the matter for anyone thinking about succession. The gift with reservation of usufruct is the technique in which parents give the bare ownership of the assets to their children and reserve for themselves the lifetime usufruct. The estate changes holder on paper, the children become bare owners, but the ones who keep living in, managing, and receiving the income from it are the parents, for as long as they live.

The gain is twofold. During their lifetime, the parents lose nothing concrete: they remain in control of, and drawing income from, what they built. In the future, when the usufructuary dies, the usufruct is extinguished and ownership consolidates automatically in the children's hands, without those assets having to go through probate. This usually means less time, less cost, and far less conflict among heirs, because the division of those assets was already resolved while alive, with the family together and not in the heat of grief.

It is a structure that combines well with others. Many families gather their properties and holdings into an asset holding company and then give the quotas of that holding to their children with reservation of usufruct, keeping decision-making power through corporate clauses. In this design, usufruct is the piece that guarantees income and control to the one who organized everything.

The POPP 65+ program from WF Advogados was designed precisely for families who want to structure this passing of their estate with legal security, combining gift, usufruct, protective clauses and, where appropriate, the family holding, in a single succession plan.

Usufruct and ITCMD: the tax enters the equation

Gifting is not free from a tax standpoint. The gift of the bare ownership to the children is a taxable event for the ITCMD, the state tax on transmission causa mortis and on gifts. The way the base is calculated on the usufruct and on the bare ownership varies from state to state, and the Tax Reform changed the tax's rules, making the rate progressive in most states. For this reason, the design of the gift must consider the ITCMD cost both on the transfer and on the eventual extinction of the usufruct.

Understanding how the ITCMD applies to the gift and to the consolidation of ownership is an essential part of any well-made estate planning. Anyone who wants to go deeper can read our guide on what the ITCMD is and how it is calculated. The practical point is that the timing of the gift and the structure chosen directly influence how much tax the family will pay throughout the succession, and that calculation is done beforehand, not afterward.

How usufruct is extinguished

Usufruct is, by nature, temporary. It is born to end, and article 1,410 of the Civil Code lists the causes of extinction. The most frequent in practice are the death of the usufructuary, renunciation, the end of the term when the usufruct is temporary, and consolidation, which occurs when the bare owner and the usufructuary become the same person. There is also extinction by destruction of the asset and, in serious cases, by fault of the usufructuary who lets the asset deteriorate.

In estate planning, the cause that matters is the death of the usufructuary. When the father or mother who reserved the usufruct dies, the right is extinguished and the bare ownership turns into full ownership in the children's hands. For real estate, it is enough to cancel the registration of the usufruct on the matrícula, upon the death certificate. There is no new probate over those assets, and this is the central saving of the technique.

When the usufruct is reserved for the couple, there is a specific rule worth knowing. Article 1,411 of the Civil Code provides that, with usufruct in favor of two or more people, the share of each one is extinguished as that person dies, unless the title expressly contains the accretion clause in favor of the survivor. That is, for the usufruct of the asset to pass in full to the spouse who remains, this clause must be expressly stated in the document. Without it, half of the usufruct is extinguished on the first death. It is a detail that changes everything in the life of the widow or the widower, and that must be provided for when drafting the gift.

The steps of a gift of real estate with reservation of usufruct, in practice, usually follow this order:

1. Survey of the estate and definition of what will be given and to whom. 2. Calculation of the ITCMD owed and planning of the timing of the gift. 3. Drafting of the deed of gift of the bare ownership with reservation of usufruct, including protective clauses (incomunicabilidade, keeping the asset out of the recipient's marital property; impenhorabilidade, protection from attachment; reversão, reversion; and, in the couple's case, the direito de acrescer, the right of accretion). 4. Payment of the ITCMD and execution of the deed at a notary's office. 5. Registration on the property's matrícula, at the Real Estate Registry Office, so that the usufruct and the new title are valid against third parties.

---

Informational content, does not replace individual legal advice. Each case has particularities that require specific analysis.

Dr. Wendel Ferreira Lopes — Attorney, OAB/MG nº 18.881. Founding partner of WF Advogados, practicing Tax, Banking and Patrimonial/Succession Law since 1999. Uberlândia/MG.

Frequently Asked Questions

What is usufruct in simple words?

It is the right to use an asset and receive its income without being the owner. Ownership divides between the bare owner, who holds title to the asset, and the usufructuary, who lives in, manages, and keeps the fruits, such as rent. It is provided for in articles 1,390 to 1,411 of the Civil Code.

What is the difference between the bare owner and the usufructuary?

The bare owner is the holder of title to the asset, has it in his name, but cannot use it or draw income from it while the usufruct lasts. The usufructuary is the one who uses, manages, and receives the fruits, without being the owner. At the end of the usufruct, full ownership returns to the bare owner.

What is a gift with reservation of usufruct?

It is the technique in which parents give the bare ownership of the assets to their children and reserve for themselves the lifetime usufruct. The children become titleholders on paper, but the parents keep living in the properties and receiving the income for as long as they live. It is widely used in estate planning.

Who pays the IPTU and the expenses of a property under usufruct?

Under article 1,403 of the Civil Code, the usufructuary bears the ordinary expenses of preservation and the taxes owed on possession or on the income of the asset, which includes the IPTU. Extraordinary repairs and larger expenses fall to the bare owner.

Can usufruct be sold?

No. Article 1,393 of the Civil Code prohibits the transfer of usufruct by alienation. The usufructuary does not sell the right. What he can do is assign the exercise of the usufruct, for example by renting the property to a third party and keeping the rent.

Can the usufructuary rent out the property and keep the rent?

Yes. Since the usufructuary has the right to collect the fruits, the rent belongs to him. Renting out is an assignment of the exercise of the usufruct, permitted by article 1,393. The bare owner has no right to that income while the usufruct lasts.

How is usufruct extinguished?

Through the causes in article 1,410 of the Civil Code, the most common being the death of the usufructuary, renunciation, the end of the term, and consolidation, when owner and usufructuary become the same person. For real estate, the extinction is completed with the cancellation of the usufruct on the matrícula.

Is probate needed when the usufructuary dies?

Over the asset under usufruct, no. With the death of the usufructuary, the usufruct is extinguished and the bare ownership consolidates automatically in the bare owner's hands. It is enough to cancel the registration of the usufruct on the matrícula with the death certificate. This is the main advantage of the gift with reservation of usufruct.

Does usufruct pay ITCMD?

The gift of the bare ownership and the institution of the usufruct involve ITCMD, the state tax on gifts. The way the base is calculated varies by state, and the Tax Reform made the rate progressive in most of them. The tax cost must be calculated before structuring the gift.

Can usufruct be for life?

Yes. It can be for life, lasting as long as the usufructuary lives, or temporary, with a fixed term. In estate planning, the lifetime usufruct is the most used, because it guarantees the donor the use of and income from the asset until the end of life.

Can husband and wife be usufructuaries at the same time?

They can. It is common to reserve the usufruct for the couple. But pay attention to article 1,411 of the Civil Code: without an express accretion clause, half of the usufruct is extinguished when the first spouse dies. For the whole usufruct to pass to the survivor, this clause must appear in the document.

Can usufruct and a family holding be used together?

Yes, and it is a frequent combination. Families gather their assets into a holding and give the quotas to their children with reservation of usufruct, keeping income and control. The usufruct guarantees the use and the dividends, and the corporate structure concentrates decision-making power in the one who organized the estate.