Usufruct in German Civil and Tax Law – Introduction

A usufruct is a very popular estate planning instrument in Germany. A usufruct is often used in situations where, in common-law jurisdictions, a trust would be created. It is similar to a life estate. This article describes the basic principles of a usufruct and how the operate under German law.


A German usufruct (Nießbrauch) is the right to use and enjoy real or personal property in accordance with §§ 1030 to 1067 of the German Civil Code (BGB).

A usufruct is an in rem right, which means that it "binds the world" and does not only operates inter personam. It is a limited right as it does not provide for full ownership. Instead the use of a usufruct provides for limited ownership rights (“a stick in the bundle”).

The person entitled to a usufruct is called the usufructuary (Nießbraucher). The person whose interest in the property is limited by the right of the usufructuary is referred to as the owner burdened by the usufruct or “bare owner” (in some jurisdictions, e.g. Louisisana, also referred to as "naked owner").

Creation of a Usufruct

A usufruct can be created

  • by a contract
  • by a Will (Testament), or
  • by operation of law. 

Creation by Will

If the usufruct is created through a Will, the testator may

Please note: While the heir (Erbe) acquires the right by operation of law with the death of the testator, a legatee must claim transfer of the usufruct from the heir. However, the testator may give him the right to transfer the usufruct to himself by naming him special executor with the power to do so. 

Creation by a Contract

If the usufruct is created by a gift (Schenkung) or other contract, the usufruct may be either created

  • by retaining the usufruct and transferring the bare ownership (Vorbehaltsnießbrauch) or
  • by transferring the usufruct and the bare ownership right to two different individuals/entities.

To create an usufruct which is funded by personal property, the owner must deliver such personal property to the transferee. Both parties must agree that the usufruct is to pass to the transferee. For creation of a usufruct by means of a contract in real property, both parties must agree, in a document notarized by a German notary (Notar) or equivalent, that the usufruct is to pass to the transferee. The usufruct must then be registered in the land registry (Grundbuch).

Creation by Operation of Law

Usufruct in a movable thing may be acquired by prescription. 

Termination of the Usufruct

The usufruct is created

  • for the lifetime of the usufructuary (life long usufruct) or
  • a limited time period. 

A life long usufruct ends with the death of the usufructuary. See § 1061 para BGB. If the usufruct is attributed to a legal entity (juristische Person), e.g. a Limited liability Company (Gesellschaft mit beschränkter Haftung) or a partnership with legal personality, e.g. limited liability partnership (Kommanditgesellschaft), it ends when the legal person or partnership with legal personality ends. See § 1061(2) BGB.

If the usufruct was created for a limited time period, the right ends when such time period ends.

Upon termination of the right, the usufructory or his successor (e.g. the heir), must hand over the property to the owner. See § 1055 BGB. If consumable things (§ 92 BGB) are the subject of the usufruct, the usufructory must pay an amount in money equal to  the value of the thing at the time of it creation to the owner. See § 1067 BGB. 

Allocation of Rights and Obligations between Usufructuary and Bare Owner

Unless something different is agreed to in the relevant documents, the usufructuary bears:

  • the current public charges (§ 1047 BGB), e.g. property tax, sewerage charges, and charges for street cleaning, waste collection, or the chimney sweep
  • the current private charges (§ 1047 BGB), e.g. interest on mortgage claims or land charges as well as any recurring payments to be made on the basis of a land charge or an annuity land charge.

The usufructuary must provide for the maintenance of the property and is obliged to carry out repairs and renovations to the extent that they are part of the normal maintenance of the thing (§ 1041 BGB), e.g. the replacement of individual roof tiles that have been damaged.

The bare owner (the person burdened with the usufruct) bears

  • the public charges that concern the original value of the real estate property, e.g. development charges;
  • repayments on mortgage claims and land charges; andhe cost for extraordinary repairs and renovations.

Please note: Most sections of the German Civil Code are default rules and the transferor may release the usufructuary from bearing charges and costs or impose further charges on him. 

The bare owner cannot interfere with the lawful exercise of a usufructuary’s use and enjoyment of the property.

Right to dispose

The ususfructory has no right to dispose (e.g. sell, convey, pledge) the property burdened with the usufruct, However, if consumable things (§ 92 BGB) are the subject of the usufruct, the usufructory becomes owner of the thing and the usufructory may dipsose of the thing. See § 1067 BGB. The same holds true with regard to a usufruct in a claim. See §§ 1075 para 2, 1067 BGB. Furthermore, the same rules apply to a usufruct in bearer instruments/instruments made out to order. See §§ 1084, 1067 BGB.

Please note: Even a usufructory, who becomes owner of the property must pay an amount in money equal to the value of the thing at the time of it creation to the owner when the usufruct ends. 

if the usufruct is created by a Will, the testator may allow the usufructory as durable executor (Dauertestamentsvollstrecker) to sell real estate or other property burdened with the usufruct, to buy new property and create a usufruct in such new property.

The usufructory may not transfer the usufruct. See § 1059 BGB. However, he may allow somebodyelse the use of the right. 

German Gift and Inheritance Tax

The value of the bare ownership right is the value of the full ownership right after deduction of the value of the usufruct. 

The value of a life long usufruct depends on the (deemed) annual net income (Jahreswert) and the average the remaining life expectancy of the usufructuary/the net present value (Kapitalwert).

The Usufruct is created by (Gift) Contract

If the owner transfers the ownership rights during his/her lifetime without consideration and retains a life long usufruct, only the value of the bare ownership right is subject to German gift tax (Schenkungsteuer)

If the owner (additionally) transfers the usufruct to a third party, gift tax is imposed only on the value of the usufruct.

The Usufruct is created by Will

If the testator gives the usufruct to a legatee, the net value of the usufruct is subject to German inheritance tax.

The heir (Erbe) may deduct the value of the usufruct from the net value of his taxable acquisition. 

Taxation Upon Termination of the Usufruct

No tax is levied when the usufruct ends and, consequently, the owner acquires full ownership.

Income Tax

As the usufructuary is entitled to income, the usufructuary and not the owner is generally subject to (German) income tax (Einkommensteuer) on income derived from the asset burdened with the usufruct.

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