Gift with reservation of usufruct: how to anticipate the inheritance while retaining use and income?

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Many parents want to organize the inheritance during their lifetime — transfer the assets to the children, simplify the future probate, avoid conflicts — but hesitate out of a legitimate fear: losing use and income of their own estate. “What if I gift everything and then need it later?” The gift with reservation of usufruct was created precisely to solve this dilemma: it allows you to transfer ownership without giving up the use and income of the assets while you are alive.

It is one of the most used tools in estate planning. In this guide, you will understand what a gift with reservation of usufruct is, why it is so valuable, how the ITCMD works, who pays the property expenses and which precautions ensure it fulfills its role — all within safe planning.

What is a gift with reservation of usufruct?

To understand it, ownership must be separated into two parts:

• Bare ownership: the “title” to the asset — who the owner is, but without the right to use it at the moment.

• Usufruct: the right to use the asset and receive its fruits (for example, living in the property or receiving the rent).

In a gift with reservation of usufruct, the donor transfers the bare ownership to the donee (usually a child), but reserves the usufruct for themselves — that is, they continue using the asset and receiving its income while alive. In practice: the parent gifts the apartment to the children, but continues living in it (or receiving the rent). Upon the donor's death, the usufruct is extinguished and ownership is consolidated automatically in the hands of the donee, without a new transfer of that asset on death, but requiring registry cancellation and potentially collation or reduction of the gift. It is this ingenuity that makes the reservation of usufruct a pillar of estate planning.

Why use the reservation of usufruct in planning?

The advantages are concrete:

• Anticipates the inheritance: the assets already pass to the children during one's lifetime, advancing the succession.

• Simplifies the future probate: with ownership already transferred (consolidating upon death), the asset is not transferred again on death, but registration, tax and possible succession adjustments remain.

• Keeps the donor's use and income: the parent does not lose the use or the income of the assets — living in, renting out, enjoying them remains theirs.

• Reduces conflicts: organizing during one's lifetime, with clear rules, prevents disputes among heirs.

In short, the reservation of usufruct delivers the best of both worlds: the transfer of the estate (with all the benefits of planning) and the security of the donor, who retains use and income within the usufruct, not all ownership powers. That is why so many families adopt it.

How does the ITCMD work and who pays the expenses?

ITCMD: the gift with reservation of usufruct is a taxable event for the ITCMD, paid at the time of the gift of the bare ownership (in São Paulo, a rate of 4% — Law 10,705/2000). State legislation governs the tax base involving the bare ownership and the usufruct. Because there are particularities, the calculation must be done with guidance, in order to pay the correct amount and take advantage of any state exemptions.

Expenses and fruits: this is a point that must be in the document, on pain of conflict. In general, the usufructuary (the person who keeps the usufruct) is responsible for the ordinary expenses — such as IPTU and upkeep — and is entitled to the fruits, such as rent. But questions such as “who pays for major renovations?” and “who receives the income?” must be expressly answered in the deed. Silence on these points is one of the main sources of friction between donor and donee — and a well-drafted document anticipates each of these questions.

Hypothetical example: Ms. Cecília's planning

Imagine the fictional Ms. Cecília, a widow with two children, who had an apartment where she lived and another that she rented out, both in São Paulo. She wanted to leave everything organized for her children, avoiding the lengthy probate she had faced when her husband died — but she was afraid of making a gift and “being left with nothing.”

The gift with reservation of usufruct was the solution. Ms. Cecília gifted the bare ownership of the two properties to her children, reserving the usufruct for herself: she continued living in her apartment and receiving the rent from the other, exactly as before. The ITCMD on the bare ownership was paid, and the deed defined clearly who would pay IPTU and renovations and that the income would be hers while alive. The result: the estate is already transferred to the children, the future probate will be much simpler (ownership consolidates automatically), and Ms. Cecília may retain use and income, but cannot sell full ownership alone or freely recover the gifts. This hypothetical example depends on retaining sufficient resources for her subsistence.

The most common (and costly) mistakes

• Not defining expenses and fruits in the document. Who pays IPTU and renovations, who receives rent — silence creates disputes.

• Ignoring the forced share. The gift to the children cannot encroach on the share of the forced heirs.

• Miscalculating the ITCMD. The base involving bare ownership and usufruct has particularities.

• Forgetting to register the usufruct. The reservation must appear on the property record.

• Doing it without overall planning. The reservation of usufruct must be part of the estate plan, not an isolated act.

Checklist: for the gift with reservation of usufruct

• Assess the assets, forced shares, collation and sufficient resources for the donor's subsistence (Civil Code arts. 544 and 548).

• Define holders, term and scope; survivorship between usufructuaries must be expressly stipulated (Civil Code art. 1,411).

• Expressly establish who pays expenses and who receives the fruits.

• Calculate ITCMD (in SP, 4% on the applicable base), exemptions and any deferred portion; initial payment does not necessarily settle all the tax.

• Execute the deed and register the bare ownership and the usufruct on the property record.

• Consider protective clauses and structure everything with a lawyer.

Frequently asked questions about gifts with reservation of usufruct

What is a gift with reservation of usufruct?

It is the gift in which the donor transfers the bare ownership of the asset to the donee (usually a child), but reserves the usufruct for themselves — the right to use the asset and receive its fruits (such as rent) while alive. In practice, the parent gifts the property to the children but continues living in it or receiving the income. Upon the donor's death, the usufruct is extinguished and ownership is consolidated in the hands of the donee. It is a classic estate planning instrument.

Why use the reservation of usufruct in planning?

Because it allows the transfer of assets to be anticipated (advancing the inheritance and simplifying the future probate) without the donor losing use and income and use of the assets during their lifetime. The parent transfers ownership to the children but keeps the security of living in the property or receiving its income. It is a way to organize the succession with peace of mind, preserving the donor's comfort and reducing conflicts and costs in the future.

How does the ITCMD work in a gift with reservation of usufruct?

The gift with reservation of usufruct is a taxable event for the ITCMD, paid at the time of the gift of the bare ownership (in São Paulo, a rate of 4% — Law 10,705/2000). Sefaz/SP guidance allows full payment or an initial payment on 2/3 of the value, with the remaining 1/3-related tax deferred to consolidation. Extinction of usufruct is not a new taxable event, but previously deferred tax may become payable. Because there are particularities, it is important to calculate the tax with guidance, in order to pay the correct amount and take advantage of any exemptions provided for in state law.

Who pays the property expenses during the usufruct?

This must be defined in the gift document, to avoid conflict. In general, the usufructuary (the person who keeps the usufruct) is responsible for the ordinary expenses, such as IPTU (municipal property tax) and upkeep, and is entitled to the fruits, such as rent. Extraordinary repairs generally fall to the owner, subject to Civil Code arts. 1,403 and 1,404; internal agreements do not necessarily change obligations to third parties. A well-drafted document answers each of these questions, avoiding disputes between donor and donee.

Is a gift with reservation of usufruct worth it in São Paulo?

For many families, yes — it is one of the most used tools in estate planning in São Paulo, because it anticipates the inheritance while preserving the donor's use and income and simplifies the future probate. But it is not automatic: it requires analyzing the estate, the heirs, the forced share, the ITCMD and the appropriate clauses. A lawyer at Falchet e Marques assesses whether, when and how the reservation of usufruct makes sense in your case.

Do I need a lawyer to make a gift with reservation of usufruct?

A lawyer is not a general legal requirement for every gift deed, but legal review is recommended. The structure involves a deed, ITCMD, registration of the usufruct on the property record, definition of expenses and fruits, protective clauses and respect for the heirs' forced share. A mistake results in undue taxation, conflict or partial nullity. A lawyer at Falchet e Marques, in São Paulo, structures the gift with reservation of usufruct safely, within the family's asset planning.

Transferring while preserving use and income

The gift with reservation of usufruct solves the biggest fear of those who want to organize the inheritance during their lifetime: transferring the estate to the children without losing the use and income of the assets. The donor retains the usufruct rights, not absolute control or a free right to revoke the gift; upon their death, ownership consolidates automatically in the children, greatly simplifying the probate.

Well structured — with the correct ITCMD, the expenses and fruits defined, and the appropriate clauses — it is one of the most efficient tools of estate planning. The key precaution is not to do it in isolation: it must be part of a plan that respects the forced share and balances the heirs.

At Falchet e Marques Sociedade de Advogados, a firm in São Paulo (Av. Paulista), we work in Succession and asset law — structuring safe gifts with reservation of usufruct, handling the ITCMD and the clauses, within planning that protects the donor and the family. If you want to organize your inheritance while retaining use and income, it is worth talking.

Talk to our team on WhatsApp: +55 11 95901-1854 — and plan your succession while retaining use and income during your lifetime.