The tontine: how to facilitate the transmission of one's real estate assets?

The tontine is an ancient mechanism which allows to secure a capital in the hands of a person by means of a retroactive property. There are globally two types of tontine, the financial tontine and the real estate tontine. Today, let's focus on the real estate tontine which can be a real solution for your acquisition project:

Why?

The principle is simple, the tontine pact is inserted in the purchase act and will allow the transmission of the patrimony at the death. The deceased is considered as never having been the owner, so the last survivor of the tontine association will be presumed to be the sole owner, and this, since the purchase act.

The tontine is often used to avoid indivision because it works differently. In the case of indivision, if a person wishes to escape, he or she can request the division or sale of the property. The tontine offers more security, it is necessary to obtain unanimity for each decision.

All the interest of the tontine lies in the transmission of the heritage. It can be used in particular for cohabitants to secure their purchase. Indeed, the tontine is not integrated in the inheritance inventory and therefore does not enter in the hereditary reserve, because it is not a donation or an inheritance. The tontine will therefore make it possible to reserve the property for the surviving cohabitant, without conditions or competition.

The conditions

The tontine is a random act, which means that it must not be possible to guess the order in which the parties to the agreement will die. Thus, the parties must be of the same overall age, otherwise the agreement may be challenged. 

The tontine must be financed by each of the parties, and this, up to the same amount at the risk of seeing his agreement requalified as a disguised donation.

Taxation

In principle, the taxation of onerous acts should be applied, however to limit this advantage it is the transfer duties for free that will be applied.

• For married or civil union spouses: the tax system is advantageous, the inheritance tax is completely exempted.

• For cohabiting spouses or third parties: the inheritance is very expensive. Indeed, the inheritance tax will be calculated on 60% of the property after an allowance of 1 594€. However, there is an exception: if the property is the spouse's main residence AND if the total value of the property is less than 76 000 €, the survivor will only pay the transfer tax.

The situation for cohabitants can be optimized in order to benefit from a more advantageous taxation, Wealth A7 can accompany you in the constitution of this tontine, contact us!

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