Succession: managing a stock portfolio dismembered, mode of employment

holding a portfolio of shares, or shares received as an inheritance is not an easy thing. The surviving spouse usufructuary and the naked children-owners have rights and obligations specific. It is better to organise to prevent problems.

After a death, the heirs, legitimately disturbed by the loss of a loved one, however, should think to settle the estate of the deceased person, file a declaration to the tax authorities, pay the appropriate fee. They must also decide whether to remain in the jointly owned or shared assets.

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This accumulation of procedures and obligations is unsettling and, despite the help of professionals such as notaries, we can quickly make mistakes. A delicate situation in which most families face is that of dismemberment. It concerns a large number of estates, at least all those in which there is a surviving spouse and children heirs.

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indeed, in the classical case of an estate without a donation to the last living, the spouse inherits either one-quarter of the succession in full property, or the whole in usufruct. With a donation, it receives the more often a quarter in full ownership and three-quarters in usufruct. The bare ownership of the property in usufruct goes to the children. The spouse has the right to use and derive the income, and the children are, in some way, owners do not have the same powers.

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The break-up of rights is easy to manage when the assets are composed of buildings. The survivor is the rent or leave the pleasure to his children and when he should sell, he does so with the agreement of the latter.

On the other hand, for movable assets, the management is much more problematic. The case of bank accounts and savings accounts, the spouse is free to dispose of it and, theoretically, his death, his heirs must find equivalent amounts, that is, it must be confessed, rarely the case.

As for the portfolio of securities (shares, shares), it is necessary to spare the goat and the cabbage : leave it to the usufructuary a freedom of action to make the most of it while preserving the rights of naked owners, who are supposed to recover at the parent's death beneficiary.

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This schema is extremely common in the family, can soon turn into a chinese puzzle and it is better to master the rules if one wants to avoid unpleasant surprises. It is necessary to know the rights and duties of each party and set the terms and conditions of sale and redemption of securities, while focusing on the fiscal treatment of the income derived from this portfolio dismembered. In order to find you in this maze of legal, join us as we examine the rights of each, and how best to manage a portfolio dismembered.

The rights of each individual, voting, taxes and dividends

In the presence of a break between the usufructuary and bare owner on securities of companies, the first question to ask is whether that right be regarded as a partner. The issue is important because the answer determines a certain number of rights and obligations, including those to participate in general meetings and to vote.

According to the abundant jurisprudence of the Court of cassation, there is no doubt that the bare owner has the quality associated with it. The case of the beneficiary is more difficult, the Court has never really ruled. In practice, the distribution of voting rights between the usufructuary and bare owner is done so in two ways.

In the companies by shares, the usufructuary has the right to vote in ordinary general assemblies, while the bare owner in extraordinary general meetings. Thus, the first quality to approve the accounts, while the second will be consulted to decide on the amendment of the articles of association. In the companies whose capital is divided into shares (usually LLC), the right to vote belongs to the beneficial owner to the decisions relating to the allocation of earnings and to the bare owner for all the others.

dividends paid in full to the beneficiary

The second essential point is to determine who is entitled to profits related to the securities dismembered. In practice, the beneficiary receives the distributed profits of the fiscal year, regardless of their origin (the result of exploitation or products of exceptional operations). There was, however, no right to the profits awaiting assignment or on those placed in reserve (not yet allocated).

However, in the event of a subsequent distribution of profits set aside as a reserve, the courts have still not determined if it was beneficial to the usufructuary or the bare owner. The majority of the specialists considers that the residual owner would be entitled thereto. But if the distribution is made, as often, by payment of a sum of money, and the usufructuary, who has the legal right to income from property, should be able to entitled to claim it.

In terms of tax, the rule is simple. The beneficiary is taxable on the dividends it receives when the company is subject to corporate tax (IS). The income tax is established in the category of income from movable property according to the rules of common law applicable to any holder of shares. In other words, the person liable to pay on its income from movable property tax at the progressive rate after applying tax relief of 40 %.

The situation is different when the company is not subject to corporate tax. This is the case of many family-run companies. In this case, the beneficiary is taxed on current earnings, while the bare owner is on the exceptional results, for example, a distribution after a realized capital gain on the sale of fixed assets.

The naked owners and the usufructuary have the ability to organize the distribution of profits within the framework of a convention. It has the advantage of being opposable to the tax administration, which will take account of the allocation chosen by the parties. It can, for example, be decided that all the distributed profits will be taxed in the name of the only beneficial owner. To avoid disputes with tax services, it is strongly recommended to sign such an agreement by notarial deed and to register in the service tax upon the payment of a fixed duty of 125 euros.

Resale and repurchase, the principles of quasi-usufruct

unlike a real estate property that is kept necessarily for many years, the sale of the securities, at least to a portfolio of shares of listed companies, is common. In theory, neither the usufructuary nor the naked owner cannot sell only the full ownership of the securities. Each one may only assign its respective rights, but it is hard to see how they will be able to find a buyer. They must, therefore, proceed with the sale joint of their rights. Of course, in case of disagreement or simply remoteness and inability to quickly obtain the consent of the bare owner or the usufructuary, everything is blocked, the portfolio végète and lose its value for lack of active management.

To avoid this paralysis, the Court of cassation (1st civil chamber, 12 November 1998, n° 96-18.041) acknowledges to the beneficiary, and to him only, the power to sell securities. However, with constraints. He must reinvest that money in the wallet and if it consumes all or part of the gains, it commits an abuse of enjoyment which may be punished by the forfeiture of his rights, in accordance with article 618 of the civil Code. It must also retain the substance of the portfolio, which means, in particular, that he is required to keep the profile management initially chosen.

Finally, if there is not a need to obtain the approval of both the bare owner, the usufructuary must inform them of any movements. It is very heavy ! It is therefore necessary to take the lead and establish a convention of quasi-usufruct, as a special modality of usufruct. It is exercised on things that are consumable (money and securities). The usufructuary has seen its rights to increase because it can freely dispose of the assets and consume at the expense of making it, at the end of the usufruct, in fact at his death, either things of the same quantity and quality or their value estimated at the date of the refund. If everything has been consumed, for example if there are more portfolio, the usufructuary, after all, used for his personal needs, the children and heirs will have a claim that will be in charge on the assets of the estate and reduce the taxable amount. Therefore, it will reduce the inheritance tax payable.

in order To be opposable to the tax authorities, this quasi-usufruct must be formalized. This is why it is better that it is established by a deed notarized written precise as possible. It is necessary to organize the management of the portfolio, leaving the surviving spouse usufructuary the right to buy and sell securities without informing the bare-owners, to choose the financial investments or banking institutions managers, to edit the profile management by recognizing, for example, the freedom to acquire rental real estate or shares of real estate investment trusts (REITS) with the proceeds of sales of securities... To limit the power of the usufructuary, safeguards may be provided, in particular, a permission of the naked owners for operations of a significant amount, as specified in the agreement.

option, and the bare owner not taxed on the capital gains

for Tax purposes, the situation of the quasi-usufruct is paradoxical and, in fact, aberrant. Although the usufructuary, and only he, has the power to sell securities in the portfolio and in levying the price, the bare owner is the person subject to tax under capital gains. But the tax administration shows good girl. She admits that capital gains are taxed in the name of the usufructuary if the latter, and the bare-owner has sent an irrevocable option to their bank. This position is included in the tax documentation (BOI-RPPM-PVBMI-20-10-20-60 no. 180).

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It is also good to remind the convention of quasi-usufruct by a formulation in the style "Single the beneficiary will receive the sale price and he alone will be taxable". The taxation of gains being set to the name of the sole beneficiary, the capital gain will be calculated without drawing a distinction between usufruct and bare ownership. It will then be equal to the difference between the sale price and the aggregate value of the securities retained in the estate said, plus the cost of all estate. This principle is also included in the administrative documentation (BOI-RPPM-PVBMI20-10-20-60 no. 120). The price of this formalism weighing, you will have resolved all the problems of management of a portfolio dismembered.