Louisiana Usufruct and Naked Ownership – The Basics

Usufruct and naked ownership are common provisions in estate plans of Louisiana residents. Other states have similar concepts – life estates and remaindermen; however, usufruct and naked ownership are unique civil law concepts. Many estate plans in Louisiana utilize usufruct and naked ownership when distributing property to their spouse and or descendants. Unfortunately, many Louisiana residents often are unfamiliar with usufruct and naked ownership and how these concepts work in the context of an overall estate plan.

When a person owns property in full ownership, they have the right of possession; the income derived from it; the right to sell, lease, mortgage or otherwise transfer the property. Property means any asset, not only real estate. A usufruct may be granted or retained over any type of property. The rights of full ownership may be split into usufruct and naked ownership.

The usufructuary is the person who owns the usufruct. The usufruct provides the usufructuary with the right to use, possess, and derive income from the property subject to the usufruct (in addition to other rights). For example the usufruct of a home gives the usufructuary the right to live in the home or to rent the home and receive the rental income. Unless specifically granted the right to sell the home without the consent of the naked owner, the usufructuary may not sell the home without the naked owner’s consent.

The naked owners are entitled to the ownership of the property when the usufruct ends. During the duration of the usufruct the naked owners may not interfere with the usufructuary’s peaceful possession and use of the property subject to usufruct. Continuing the example of a usufruct of a home, at the termination of the usufruct the naked owners become the full owners of the home. If the usufruct is over a bank account, the usufructuary may spend the cash. However, when the usufruct ends the naked owners are entitled to receive the value of the bank account at the inception of the usufruct.

A usufruct may be for the lifetime of the usufructuary or for a more limited duration. For example the usufruct may be for a period of 10 years, or it terminate upon the occurrence of an event. A common stipulation is to terminate a surviving spouse’s usufruct upon remarriage.

If you have questions about how usufruct and naked ownership are used in estate planning, or probate, or Medicaid long-term care questions, contact Houma attorney John Sirois at 985-580-2520 or email him. You can find more information on John’s website and in his book, Louisiana Retirement and Estate Planning, 2014 Edition.