Usufruct: Who Pays the Property’s Bills?


What is the right of usufruct?

Since it was ruled by the European Supreme Court that Spain had been discriminating against non-residents regarding Inheritance and Gift tax, now that non-residents enjoy the same tax breaks than residents, there has been an increase in cases where parents donate their property to their children, instead of leaving it to them in their will.

This is a very interesting option, especially in areas like Torrevieja and Orihuela, where ABC Solicitors is, because the Valencia Tax Authorities have set inheritance & gift tax for spouses and direct descendants (or ascendants) to be 0 € for any inheritance or gift received which is worth under 100,000 €.

So, many parents are able to gift their property to their children without them having to pay inheritance & gift tax. Also, they can give ownership of the property to their children, but retaining the right to keep using and enjoying it until they both pass. This is called the “right of usufruct”.

In most cases this is an ideal solution for both parents and their children. However, it can be a bit confusing afterwards to know who needs to pay for what when it comes to the gifted property.

In general, the usufructuary (the parents in our case) needs to pay the ordinary expenses resulting from the use of the property:

  1. Utilities (water, electricity, gas…)
  2. IBI/SUMA tax
  3. Refuse colletion tax
  4. Community fees
  5. Ordinary repairs derived from the day to day use of the property

The owner of the asset (the children) is responsible for the following expenses:

  1. Extraordinary repairs that do not correspond to a wear and tear derived from the normal use of the property (or example, if the property needs rewiring or re-plumbing).
  2. Extraordinary community fees that are not part of the ordinary fees paid by the usufructuary. The usufructuary needs to inform the owner if the property needs any urgent repairs.

Of course, the above are just general guidelines. If you need any specific advice about your property and how you can donate it to your children keeping the right of usufruct, please contact us. We are always happy to hear from you.

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