Leave the property to your children and keep using it: usufruct and bare ownership
Understand how they work, which taxes arise and how far they protect, with ex-DIAN lawyers and accountants at your side.

The usufruct is the real right to enjoy a thing on condition of preserving its form and substance and returning it (Art. 823). Bare ownership is the owner's right without the enjoyment, while the usufruct exists; both coexist over the same asset (Art. 824). Bare ownership can be transferred by act between living persons and transmitted by reason of death, and the usufruct cannot be transmitted by will or on intestacy (Art. 832), so it does not pass to the usufructuary's heirs.

It depends on the act. If the bare ownership is transferred free of charge (gift), the beneficiary generates occasional gain (Tax Statute, Art. 302), and its base is measured with the special rule of Article 303, item 11: the lifetime usufruct is valued at 70% of the total value of the asset, the temporary one at 5% for each year of duration without exceeding 70%, and bare ownership is the difference. The value of the real estate is determined under Article 277. The applicable rates and exemptions are explained in lifetime gift. In addition there are deed and registration costs, and the national stamp tax (Art. 519 and following) may or may not apply depending on the instrument, its amount and the rate in force: it is verified case by case. If the act is a sale rather than a gift, the tax analysis is different.

Paragraph 3 of Article 303 of the Tax Statute provides that no occasional gains are generated by reason of the consolidation of the usufruct in the bare owner. That is, the reunion of the usufruct with the bare ownership upon extinction, for example by the death of the usufructuary, does not in itself generate occasional gain. That does not exclude other effects, such as those the usufructuary's succession may have with respect to other assets or the costs of cancelling the registration, which are analyzed case by case.

Civil fruits, such as rents, belong to the usufructuary day by day (Civil Code, Art. 849), so, in principle, that income is declared by the usufructuary. Who bears the conservation expenses, property tax and other charges can be agreed between the bare owner and the usufructuary, and those agreements take precedence (Art. 850), without prejudice to public-order rules. It is advisable to put it in writing and review it with the accountant.

It is not a shield. Every personal obligation gives the creditor the right to pursue its enforcement against all of the debtor's assets, present or future, except those that cannot be attached (Civil Code, Art. 2488). The usufruct can be attached by the usufructuary's creditors, who may also object to an assignment or waiver made in fraud (Art. 862). Bare ownership answers for its owner's debts. And DIAN, in enforced collection, may order the attachment and seizure of the debtor's assets (Arts. 823 and 837 of the Tax Statute). What the usufruct can achieve is to organize the succession and the administration of the asset. For legitimate protection measures, see asset shielding against DIAN.

It is legally possible, but risky. Article 2491 of the Civil Code allows creditors to ask for rescission of acts carried out to their detriment, proving bad faith and the detriment, within one year counted from the act (the provision is worded for acts prior to the assignment of assets or the opening of the insolvency proceeding, and each case must be analyzed with its particularities). In addition, if DIAN considers that a transaction has no apparent economic reason or purpose and seeks a tax benefit, it may recharacterize it as abuse in tax matters (Tax Statute, Art. 869). And moving assets to avoid collection can have criminal consequences; at Ligal, the same defense handles that front from start to finish. The practical conclusion: analyze before moving assets, not after.

Occasional gain on gratuitous acts is determined with legal valuation rules (Art. 303 and, for real estate, Art. 277, which takes the cadastral appraisal or the tax cost, whichever is higher), not with a freely chosen figure. In civil terms, an act that does not reflect reality can be challenged as simulated, and private counter-deeds have no effect against third parties (Art. 1766). Document the act as it is, with the real value and conditions, and keep the valuation support.

A gift of the bare ownership to one child can interact with the rights of the other heirs in the succession. The specific effect depends on how the act is documented, on whether it is charged to the forced share, and on the composition of the family, so it must be reviewed in the specific case before signing. For gifts in general, see lifetime gift.

Usufruct with bare ownership is useful when you want to transfer ownership and keep the use and the income, and you have clarity about a duration (for life or for a number of years). A gift of the whole asset transfers everything today. A holding company or a trust usually suits when there are several assets, several children or a family business and governance is sought. The family estate seeks to protect the home with the rules and limits of that structure. There is no universal answer: the right structure is the one that meets your goal with the least burden and the least risk in your specific case. See the pages for each alternative.

The usufructuary may lease the usufruct and assign it to whomever they wish, for consideration or free of charge, unless the grantor has prohibited it and the owner does not release them (Civil Code, Art. 852); the assignor remains directly liable to the owner. The usufruct is extinguished, among other causes, by the natural death of the usufructuary, by consolidation with the ownership, by prescription or by the usufructuary's waiver (Art. 865). A waiver made in fraud of the rights of the usufructuary's creditors can be challenged (Art. 862).

Ligal is a firm specialized in tax, customs and tax criminal law. Under the direction of Juan Santiago Rodríguez Prieto, an ex-DIAN tax lawyer, together with accountant Jeysson Pulido and LIGAL Auditores (certified public accountants), we combine the civil and tax reading of usufruct with the calculation of the burden and represent you before DIAN, from design to defense. Our work is backed by 5.0 / 5 on Google with 36 reviews: https://share.google/VVzMvULrOj8Mj52Au. The team handles real cases of estate planning, audits and litigation. No result is guaranteed.