Article 990 I: NP and US Taxed Pro-Rata
Under CGI Art. 990 I, when the beneficiary clause splits the death benefit between a usufruitier and one or more nus-propriétaires, each is treated as a beneficiary to the extent of their pro-rata share of the capital. The valuation is done using the CGI Art. 669 usufruct scale, which sets the value of the usufruct as a percentage of full ownership based on the usufruitier's age. The bare ownership is the complement: if usufruit = 30%, bare ownership = 70%.
The €152,500 abatement is likewise split pro-rata. The usufruitier benefits from their usufruit fraction of the abatement; the nu-propriétaire from the bare ownership fraction. This means neither party benefits from a full €152,500 abatement individually.
Multiple nus-propriétaires: multiple abatement pairs
Where the same capital is assigned in usufruit to one person and in bare ownership to several, the administration accepts that each NP/US pair generates its own €152,500 abatement — meaning that with two NPs, there are effectively two sets of the pro-rata abatement. However, the usufruitier can only benefit from a total abatement of €152,500 across all NP/US pairs (i.e., their usufruit fraction from each NP's abatement, capped globally at €152,500).
M. Cador: contract value €900,000. Three children each receive €210,000 in bare ownership (total €630,000 NP) and €90,000 each in full ownership (total €270,000 FP). Spouse (age 72) is usufruitier. At age 72, the Art. 669 scale gives usufruit = 30%, bare ownership = 70%.
Taxable NP value = €210,000 × 70% = €147,000
Available NP abatement = €152,500 × 70% = €106,750
Taxable after abatement = €147,000 − €106,750 = €40,250
Levy at 20% = €8,050 per child
For each child's FP share of €90,000:
Residual abatement = €152,500 − €106,750 = €45,750
Taxable = €90,000 − €45,750 = €44,250
Levy at 20% = €8,850 per child
Total per child: €16,900
The 2011 reform and its impact
Before Loi 2011-900 (effective 31 July 2011), the pre-reform doctrine gave the full €152,500 abatement to the usufruitier alone, meaning that where the usufruitier was the surviving spouse (exempt under TEPA), no levy was due on the death benefit at the first death — not even on the NP's share. Combined with the deductibility of the restitution debt from the usufruitier's estate at the second death, this produced a near-zero overall levy. The 2011 reform ended this: since 31 July 2011, an exonerated usufruitier does not transfer their abatement share to the nu-propriétaire. The NP must pay their own fraction of the levy on the pro-rata capital above their reduced abatement.
However, the effective rate payable by the NP is significantly lower than the nominal 20%/31.25%, because the levy only applies to the bare ownership fraction — giving an effective rate of only 14% in the 20% tranche at age 71–80. The structure retains meaningful fiscal efficiency, particularly when the usufruitier is young (larger usufruit fraction → smaller NP fraction → lower effective rate for the NP).
| Age of usufruitier | Usufruit value | NP (taxable) fraction | Effective rate — 20% tranche | Effective rate — 31.25% tranche |
|---|---|---|---|---|
| 51–60 years | 50% | 50% | 10.00% | 15.63% |
| 61–70 years | 40% | 60% | 12.00% | 18.75% |
| 71–80 years | 30% | 70% | 14.00% | 21.88% |
| 81–90 years | 20% | 80% | 16.00% | 25.00% |
| 91 years and over | 10% | 90% | 18.00% | 28.13% |
Article 757 B: Same Pro-Rata Principle
For contracts subject to Art. 757 B (post-70 premiums on post-20 November 1991 contracts), the same Art. 669 pro-rata applies: the NP and US are each taxed on their share of the premiums, and the €30,500 shared abatement is divided between them in the same proportion. When the usufruitier is the surviving spouse (exempt), the entire €30,500 abatement accrues to the nu-propriétaire — a more favourable rule than under Art. 990 I, where the exonerated usufruitier's share of the abatement is lost.
Practical Drafting: Enabling Tax Payment
The démembrement creates a practical problem: neither the usufruitier (who receives the capital in quasi-usufruit but has no "free" share) nor the nu-propriétaire (who has only a claim, not cash) has liquid funds in full ownership to pay their respective levy. The beneficiary clause must anticipate this. Two approaches:
- For the usufruitier: provide that the quasi-usufruit covers a fraction sufficient to fund their levy, so they can use that fraction to pay without breaching the quasi-usufruit mechanism.
- For the nu-propriétaire: either (1) grant a small fraction of the capital in full ownership to fund the levy, or (2) provide that the usufruitier will lend the NP the levy amount (repayable by offset against the restitution debt at the second death).
The Restitution Debt: Deductibility and Proof
At the usufruitier's death, the nu-propriétaire's claim against the estate for repayment of the capital originally received in quasi-usufruit constitutes a deductible liability from the usufruitier's taxable estate (CGI Art. 768). The nominal amount of the debt reduces the succession base — effectively meaning the NP recovers their share of the capital at the second death without further succession duty.
This deductibility is not a specific advantage of the assurance-vie démembrement: it simply reproduces the fiscal neutrality of a classic property démembrement, where the NP would reconsolidate full ownership without additional duty. However, if the capital placed by the usufruitier has grown in value and the restitution debt is only for the nominal amount (principle of monetary nominalism), the gain in value above the nominal debt remains taxable at the second death. An indexation clause can address this — but must have genuine civil justification to withstand abuse-of-law scrutiny.
Does Art. 773 2° CGI require a formal instrument?
CGI Art. 773 2° provides that debts owed by a deceased to their presumptive heirs are presumed fictitious and deductible only if constituted by an authentic act or a private deed with a date certain prior to death, and proved genuine and existing at the date of death. This provision could potentially disqualify an unrecorded restitution debt.
However, the administration and the courts have clarified that Art. 773 2° only applies to debts consented to by the deceased and does not apply to debts arising by operation of law. The quasi-usufruit on a sum of money (C. civ. Art. 587) arises by statute when a sum is paid in démembrement — the usufruitier does not "consent" to the restitution debt in the contractual sense. Accordingly, the restitution debt is deductible even without a recorded instrument (Cass. com. 4-12-1984). That said, recording in an authentic act or a registered deed is strongly recommended for evidentiary reasons: it eliminates any risk of challenge by the tax authority and should be registered with the FCDDV (Fichier central des dispositions de dernières volontés).
Even though Art. 773 2° CGI does not technically require a formal instrument for a quasi-usufruit arising by operation of law, recording the restitution debt in an authentic act (acte notarié) or a registered private deed immediately after the death benefit is paid remains best practice. It eliminates any dispute about the debt's existence and amount at the second death, allows indexation clauses to be given date certain (essential for abuse-of-law purposes), and should be cross-registered with the FCDDV to ensure the deed is found when the succession is opened.
Article 751 CGI: The Presumption and How to Counter It
CGI Art. 751 provides a fiscal presumption: property held in usufruit by the deceased and in bare ownership by one of their presumptive heirs is deemed, for tax purposes, to be fully in the usufruitier's estate. The death benefit split in démembrement may fall within this presumption at the usufruitier's later death: the children (NP) are presumptive heirs of the usufruitier (their other parent or grandparent). The presumption is rebutted if: there was a regular donation made more than three months before death; or the démembrement was made at no charge, more than three months before death, by authentic act, with bare ownership valued using the Art. 669 scale.
The quasi-usufruit argument
A stronger counter-argument is available where the capital was paid in cash and the démembrement produced a genuine quasi-usufruit (rather than a reported or deferred démembrement under Arts. 601/602). Under C. civ. Art. 587, once a quasi-usufruit applies, the nu-propriétaire no longer holds a real right over the asset: they hold only a personal claim against the usufruitier. CGI Art. 751 requires that the deceased "held the usufruit" and the heir "held the bare ownership" at death — but where a genuine quasi-usufruit is in place, the usufruitier holds plenary ownership of the cash (not mere usufruit) and the NP holds a claim (not bare ownership of an identifiable asset). The conditions for Art. 751 are therefore arguably not met.
Abuse-of-Law Risk
The risk of abuse-of-law challenge (LPF Art. L 64 — exclusively fiscal purpose; or LPF Art. L 64 A — mainly fiscal purpose since 2020) is low for a genuine démembrement clause. The civil utility is real: the structure protects the surviving spouse (who has full use of the capital) while preserving the children's long-term right to recover the capital. Since the 2011 reform reduced the fiscal advantage, this civil utility argument is even stronger. That said, since 2020 the "mainly fiscal purpose" standard (Art. L 64 A) is less demanding for the tax authority to invoke: indexation clauses on the restitution debt require careful justification and genuine civil rationale.
Quasi-Usufruit Reinvestment in a New Life Insurance Contract
Where the usufruitier uses the cash received in quasi-usufruit to subscribe a new life insurance contract, designating the NP as beneficiary (thereby directing the death benefit to the creditor of the restitution debt), the tax authority has sought to argue that this designation constitutes a payment à titre onéreux, extinguishing the restitution debt and preventing its deduction from the estate. The Cour d'appel de Douai (12-5-2016 n° 15/03664) rejected this analysis: the restitution debt survives because the beneficiary designation does not constitute a means of anticipatory payment. However, the safest approach is to designate someone other than the NP as beneficiary of the new contract, to eliminate any risk of recharacterisation.
Where the usufruitier reinvests the quasi-usufruit capital into a new life insurance contract, designating the nu-propriétaire as beneficiary creates a risk that the tax authority will argue the restitution debt has been anticipated and discharged — preventing its deduction from the estate at the second death. The safest approach is to designate a person other than the nu-propriétaire as beneficiary of the new contract, or to obtain specialist advice on the structuring before subscribing.
Our French law practice advises on the fiscal and civil mechanics of the démembrement de la clause bénéficiaire, restitution debt documentation, and the interaction with CGI Art. 751 and inheritance planning.
Book a ConsultationThis article is provided for general informational purposes only and does not constitute legal advice. Tax law in this area evolves through case law and administrative doctrine. Always consult a qualified French notary and lawyer before implementing any démembrement structure. References are correct to the best of the author's knowledge as of the date of publication.
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Key Legal References
Art. 990 I levy on life insurance death benefits: where the beneficiary clause splits the capital between an usufruitier and a nu-propriétaire, each is taxed on their pro-rata share (valued using the CGI Art. 669 scale). The €152,500 abatement is split pro-rata. Since 31 July 2011 (Loi 2011-900), an exonerated usufruitier’s share of the abatement is lost, not transferred to the NP.
Mandatory usufruct/nue-propriété valuation scale for all French gift taxes, inheritance taxes, and registration duties including Art. 990 I allocation of the €152,500 abatement: allocates value by the usufruitier’s age in nine brackets from 90% (under 20) to 10% (over 91).
Art. 757 B succession duty on post-70 premiums: same pro-rata principle applies as for Art. 990 I. The €30,500 shared abatement is divided proportionally between NP and US. Where the usufruitier is the exempt surviving spouse, the entire €30,500 abatement accrues to the nu-propriétaire.
Restitution debt deductibility: the nu-propriétaire’s créance de restitution against the usufruitier’s estate at the second death constitutes a deductible liability from the usufruitier’s taxable estate, reducing the succession base.
Debts to presumptive heirs: normally require an authentic act or private deed with a date certain prior to death for deductibility. However, this article only applies to debts consented to by the deceased — not to debts arising by operation of law such as the quasi-usufruit restitution debt.
The restitution debt arising from a quasi-usufruit on money is deductible from the estate even without a recorded convention, because it arises by operation of law (C. civ. Art. 587), not by contract — Art. 773 2° CGI does not apply.
Art. 751 CGI presumption: property held in usufruit by the deceased and in bare ownership by a presumptive heir is deemed fully in the usufruitier’s estate. May be rebutted where a genuine quasi-usufruit is in place — the usufruitier holds plenary ownership of cash, not mere usufruit; the NP holds a personal claim, not bare ownership of an identifiable asset.
Quasi-usufruit: where the subject of the usufruit is a consumable asset (cash), the holder may use and dispose of it freely but becomes a debtor to the nu-propriétaire for the equivalent value at the end of the usufruit. Foundation of both the deductibility of the restitution debt and the Art. 751 counter-argument.
Abuse of law — exclusively fiscal purpose: the tax authority may challenge arrangements that are fictitious or have no purpose other than tax reduction.
Abuse of law — mainly fiscal purpose (since 2020): lower standard for the tax authority to invoke; applies where the main purpose is fiscal even if a genuine civil purpose also exists. Indexation clauses on the restitution debt require careful justification.
Quasi-usufruit reinvestment in a new life insurance contract: where the usufruitier designates the nu-propriétaire as beneficiary of a new contract subscribed with the quasi-usufruit capital, the tax authority argued the restitution debt had been anticipated and discharged. Cour d’appel de Douai rejected this analysis: the beneficiary designation is not a means of anticipatory payment and the restitution debt survives.
